Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐No☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes☐No☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes☒No☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐No☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The Nasdaq Global Select Market on December 31, ~~2020,~~2021, was ~~57,971,831.~~$41,047,675. This number does not include shares of common stock held by our investors Imperial Capital Asset Management, LLC and Northern Right Capital Management, L.P. and persons who are directors or executive officers.

The number of shares of the Registrant’s common stock outstanding as of September ~~1, 2021~~6, 2022 was ~~25,957,187.~~29,620,083.

Unless the context otherwise requires, “we,” “us,” “our,” the “Company,” “Great Elm,” “GEG” and terms of similar import refer to Great Elm Group, Inc. and/or its subsidiaries.

This report and certain information incorporated herein by reference contain forward-looking statements under the Private Securities Litigation Reform Act of 1995. Such statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “seek,” “anticipate,” “intend,” “estimate,” “plan,” “target,” “project,” “forecast,” “envision” and other similar phrases. Although we believe the assumptions and expectations reflected in these forward-looking statements are reasonable, these assumptions and expectations may not prove to be correct, and we may not achieve the financial results or benefits anticipated. These forward-looking statements are not guarantees of actual results. Our actual results may differ materially from those suggested in the forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, including, without limitation:

These forward-looking statements speak only as of the time of filing of this report and we do not undertake to update or revise them as more information becomes available. You are cautioned not to place undue reliance on these forward-looking statements. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

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.

Our goal is to build a diversified holding company focused on generating attractive, risk-adjusted returns on investment and long-term value creation. We intend to accomplish this principally through:

As of June 30, ~~2021,~~2022, we had approximately ~~$952~~$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.

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. Since then, we have grown the business organically through investments in scalability as well as inorganically through tuck-in acquisitions.

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. GECM, our wholly-owned registered investment adviser subsidiary, is an investment adviser providing investment management services to GECC and Monomoy REIT, our largest investment ~~vehicle,~~vehicles, as well as private funds, including the Great Elm SPAC Opportunity Fund, LLC (GESOF), and separate accounts for an institutional investor. The combined assets under management for these entities as of June 30, ~~2021~~2022 was approximately ~~$294.7~~$607.0 million.

GECC was established in ~~2016. At this time, GECC~~2016 and it elected to be treated as a BDC under the Investment Company Act of 1940, as amended (the Investment Company Act). We own approximately ~~23.6%~~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. 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).

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.

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. In June 2021, we sold the real estate business.

For additional information see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

~~On March 10, 2021, we entered into a transaction agreement with MAST Capital Management, LLC (MAST) and David Steinberg pursuant to which MAST and Mr. Steinberg agreed to sell to GEG:~~

In consideration for the foregoing, we agreed to issue to MAST $2.25 million in aggregate principal amount of newly issued Convertible Notes (as defined below). Following this transaction, MAST will no longer have any right to appoint directors to the board of directors of any GEG entity. We refer to these transactions as the MAST Transactions.

On December 21, 2020, Great Elm Capital Group, Inc. (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.

On December 29, 2020, we completed a reorganization of our corporate structure, where ~~Great Elm Capital Group, Inc.~~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”. ~~Forest~~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.

Following the consummation of the Holding Company Reorganization, J.P. 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.

Using proceeds from the JPM Transactions, DME Inc. paid off the term loan with Corbel (the Corbel Facility).

On May 31, 2021, our wholly-owned subsidiary Great Elm DME Holdings, Inc. exchanged ~~their~~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. Following the consummation of the reorganization, we no longer have an interest in DME Inc.

On June 29, 2021, GP ~~Corp~~Corp. assigned the rights to a profit sharing agreement with GECM, their intercompany obligation under ~~the~~a senior secured note payable issued by GP Corp. ~~Note~~ and other assets and liabilities to their wholly-owned subsidiary Great Elm Capital GP, LLC (GEC GP). 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.

During the ~~years~~year ended June 30, ~~2021~~2022 and ~~2020,~~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~~27, 2020 and subsequently expanded (CARES Act) of $2.4 million and $4.8 million, ~~and $5.1 million, respectively. Stimulus received in 2021 consists~~respectively, consisting of employee retention payroll tax ~~credits, while stimulus received in 2020 consists of a forgivable Paycheck Protection Program Loan of $3.6 million (PPP Loan~~credits.) and grants from the U.S. Department of Health and Human Services of $1.4 million. During the year ended June 30, 2021, we submitted a forgiveness application seeking full forgiveness of the PPP Loan and such forgiveness was approved.

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, ~~2021,~~2022, we evaluated a number of opportunities in these areas.

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.

We had ~~369~~381 employees as of June 30, ~~2021,~~2022, including the ~~357~~360 employees of our durable medical equipment subsidiaries.

The following documents and reports are available on or through our website as soon as reasonably practicable after we electronically file such materials with, or furnish to, the SEC:

The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. Our stockholders may also obtain a printed copy of any of the above documents or reports ~~free of charge~~ 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 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.

Our business is subject to a number of risks. You should carefully consider the following risk factors, together with all of the other information included in this report, before you decide whether to invest in our securities. The following risks are not the only risks we face. If any of the following risks occurs or continues to occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the trading price of our common shares could decline, and you may lose all or part of your investment. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated.

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. 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.

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. 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. The process to identify potential investment opportunities and strategic transaction partners, to investigate and evaluate the future returns therefrom and business prospects thereof and negotiate definitive agreements with respect to such transactions on mutually acceptable terms can be time consuming and costly. We are likely to encounter intense competition from other companies with similar business objectives to ours, including private equity and venture capital funds, sovereign wealth funds, special purpose acquisition companies (SPACs), investment firms with significantly greater financial and other resources and operating businesses competing for acquisitions. 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. If such a purchase or sale is not successfully completed, integrated or managed effectively, or does not result in the benefits or cost savings we expect, our business, financial condition or results of operations may be adversely affected.

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. 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. 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. For example, as part of our investment management business we will direct investments in a wide variety of industries and vehicles, including ~~special purpose acquisition companies (SPACs),~~SPACs, which may decline in value. Except as required under the Nasdaq Stock Market LLC (Nasdaq) rules and applicable law, we will not seek stockholder approval of any investment or acquisition that we may pursue, so you will most likely not be provided with an opportunity to evaluate the specific merits or risks of such a transaction before we become committed to the transaction. Our business, financial condition and results of operations are dependent upon our investments. Any material adverse change in one of our investments or in a particular industry in which we invest may cause material adverse changes to our business, financial condition and results of operations. 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.

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. Even if we conduct extensive due diligence on a target business that we invest in, we cannot assure you that this diligence will identify all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business or outside of our control will not later arise. 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. 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. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate covenants under our debt agreements. Accordingly, you could suffer a significant reduction in the value of your shares.

We may not correctly assess the management teams of the businesses we invest in. The value of the businesses we invest in is driven by the quality of the leaders of those businesses. When evaluating the desirability of a prospective target business, our ability to assess the target business’ management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we expected. 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. 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. 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. Increased competition or an adverse change in our competitive position could lead to a reduction of business and therefore a reduction of revenues and profits.

Competition also extends to the hiring and retention of highly skilled management and employees. A competitor may be successful in hiring away employees, which may result in us losing business formerly serviced by such employees. Competition can also increase our costs of recruiting, hiring and retaining the employees we need to effectively operate our business.

Changing conditions in financial markets and the economy could impact us through decreased revenues, losses or other adverse consequences. 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:

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, ~~2021,~~2022, we had NOL carryforwards of approximately ~~$952~~$821 million. 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. 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.

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. We record reserves for unrecognized tax benefits based on our assessment of the probability of successfully sustaining tax filing positions. Management exercises significant judgment when assessing the probability of successfully sustaining tax filing positions, and in determining whether a contingent tax liability should be recorded and, if so, estimating the amount. If our tax filing positions are successfully challenged, payments could be required that are in excess of reserved amounts or we may be required to reduce the carrying amount of our net deferred tax asset, either of which result could be significant to our financial position, cash balances and results of operations.

We may issue notes or other debt securities, or otherwise incur substantial debt, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us. We may choose to incur substantial debt to finance our growth plans. For example, in ~~February 2020,~~June 2022, we raised ~~$30~~$26.9 million through the issuance of ~~5.0% Convertible Senior PIK~~7.25% Notes due ~~2030.~~2027. The incurrence of additional debt could have a variety of negative effects, including:

The financial services industry is subject to extensive regulation, including recent legislation and new or pending regulation, which may significantly affect our business. The financial services industry is subject to extensive laws, rules and regulations. In recent years in particular, there has been significant legislation and increased regulation affecting the financial services industry. These legislative and regulatory initiatives affect us, our competitors, our managed investment products and our customers. These changes could have an effect on our revenue and profitability, limit our ability to pursue business opportunities, impact the value of assets that we hold, require us to change certain business practices, impose additional costs on us, and otherwise adversely affect our business. Accordingly, we cannot provide assurance that legislation and regulation will not eventually have an adverse effect on our business, results of operations, cash flows and financial condition.

Firms that engage in securities and derivatives trading and wealth and asset management must comply with the laws, rules and regulations imposed by national and state governments and regulatory and self-regulatory bodies with jurisdiction over such activities. 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. Regulators will supervise our business activities to monitor compliance with laws, rules and regulations of the relevant jurisdiction. In addition, if there are instances in which our regulators question our compliance with laws, rules, and regulations, they may investigate the facts and circumstances to determine whether we have complied.

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. If any of our financial, accounting or other data processing systems do not operate properly or are disabled or if there are other shortcomings or failures in our internal processes, people or systems, we could suffer an impairment to our liquidity, a financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage. These systems may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control, including a disruption of electrical or communications services or our inability to occupy one or more of our buildings. 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. If the accounting, trading or other data processing systems on which we are dependent are unable to meet increasingly demanding standards for processing and security or if they fail or have other significant shortcomings, we could be adversely affected. Such consequences may include our inability to effect transactions and manage our exposure to risk.

We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. 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. Cyberattacks and other cyber incidents are occurring more frequently, are constantly evolving in nature, are becoming more sophisticated and are being carried out by groups and individuals (including criminal hackers, hacktivists, state-sponsored actors, criminal and terrorist organizations, individuals or groups participating in organized crime and insiders) with a wide range of expertise and motives (including monetization of corporate, payment or other internal or personal data, theft of computing resources, financial fraud, operational disruption, theft of trade secrets and intellectual property for competitive advantage and leverage for political, social, economic and environmental reasons). Such cyberattacks and cyber incidents can take many forms including cyber extortion, denial of service, social engineering, such as impersonation attempts to fraudulently induce employees or others to disclose information or unwittingly provide access to systems or data, introduction of viruses or malware, such as ransomware through phishing emails, website defacement or theft of passwords and other credentials, unauthorized use of computing resources for digital currency mining and business email compromises. 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. As we expand our business, there can be no assurance that financial controls, the level and knowledge of personnel, operational abilities, legal and compliance controls and other corporate support systems will be adequate to manage our business and growth. The ineffectiveness of any of these controls or systems could adversely affect our business and prospects. In addition, if we acquire new businesses and introduce new products, we face numerous risks and uncertainties integrating their controls and systems, including financial controls, accounting and data processing systems, management controls and other operations. A failure to integrate these systems and controls, and even an inefficient integration of these systems and controls, could adversely affect our business and prospects.

Losses not covered by insurance may be large, which could adversely impact our financial performance. We carry various insurance policies on our assets. These policies contain policy specifications, limits and deductibles that may mean that such policies do not provide coverage or sufficient coverage against all potential material losses. There are certain types of risk (generally of a catastrophic nature such as war or environmental contamination) which are either uninsurable or not economically insurable. Further, there are certain types of risk for which insurance coverage is not equal to the full replacement cost of the insured assets. Should any uninsured or underinsured loss occur, we could lose our investment in, and anticipated profits and cash flows from, one or more of our assets or operations.

We also carry directors and officers liability insurance (D&O insurance) for losses or advancement of defense costs in the event a legal action is brought against the company’s directors, officers or employees for alleged wrongful acts in their capacity as 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 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. ~~Recent surges in virus transmission have caused local, state and federal governments to re-assess their policies and initiatives to mitigate the spread of the virus.~~ 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. ~~While the ultimate impact of the COVID-19 pandemic on our business remains uncertain, the~~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. We~~set-ups, though we have ~~also~~ observed ~~higher cancellation rates~~recovery in demand during the current year. 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. However, if it were to continue for attended sleep studies since March 2020. Although significant disruption to the supply chain has not been observed to date directly related to COVID-19, future disruptions could occur depending on the future duration and magnitudean extended period of ~~the pandemic. Such disruptions, were they to occur,~~time, it could adversely impact our business, financial condition or results of operations, or impact the recoverability of our long-lived assets.

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. 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. 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. 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.

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. 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.

Adverse trends in the healthcare industry may negatively affect our investment in ~~Great Elm Healthcare,~~HC LLC, ~~(HC LLC),~~ a supplier of durable medical equipment and services. The healthcare industry is currently experiencing, among other things:

These factors may negatively impact the economic performance of HC LLC, which may have a material adverse effect on our business and financial condition.

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. 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.

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 21st Century Cures Act and the ~~Coronavirus Aid, Relief and Economic Securities (~~CARES Act~~) Act~~ contain provisions that directly impact reimbursement for the durable medical equipment products supplied by HC LLC. 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. 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. 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.

The competitive bidding process under Medicare could adversely impact the business and financial condition of HC LLC. 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. 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. 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. 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. 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.

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. 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.

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. HC LLC utilizes single-source suppliers for some of the components and subassemblies it uses in its sleep and respiratory-focused durable medical equipment. 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 may experience problems with some of its suppliers in the future. It may not be able to quickly establish additional or replacement suppliers, particularly for single source components or subassemblies. Any interruption or delay in the supply of components or subassemblies, or HC LLC’s inability to obtain components or subassemblies from alternate sources at acceptable prices in a timely manner, could impair its ability to meet the demand of its customers and cause them to cancel orders or switch to competitive products, potentially resulting in a loss of revenues.

On June 14, 2021 the Company received notice from Philips Respironics, a key supplier, that certain positive air pressure equipment and ventilator devices that we distribute and sell would be included in a voluntary recall. The recall was initiated by Philips Respironics due to potential health risks to patients involving the polyester-based polyurethane sound abatement foam used in the recalled devices. Based on testing performed by Philips Respironics, this foam may degrade into particles which may enter the device’s air pathway and be ingested or inhaled by the user, and the foam may off-gas certain chemicals leading to potential health risks. Patients using these devices have been instructed to talk with their health care provider regarding the most appropriate options for treatment for their condition in light of this recall.

Since June 14, 2021, the Company has worked with affected patients to register their device on the Philips Respironics’ recall website.

Currently, it is not possible to purchase these positive air pressure equipment and ventilator devices from Philips Respironics. As a significant supplier in the space, this has led to observed supply chain constraints for such devices. While the Company regularly maintains certain on-hand inventory stores of such equipment, a prolonged shortage could significantly affect the Company’s ability to service all patient demand for these devices and materially and adversely affect the Company’s business and results of operations.

The Company cannot predict the potential legal, regulatory, and financial risks that may arise out of the recall. It is possible that some patients will discontinue use of their device, which could affect the Company’s ability to continue billing for service. Furthermore, the Company may be subject to future litigation related to the recall, including but not limited to claims related to personal injury for devices affected by the recall. The Company cannot predict what additional actions will be required of the Company by the Food and Drug Administration or other state or federal agencies related to the recall.

Philips Respironics produces alternative ventilator devices that are not affected by the recall and became available for purchase beginning in April 2022. Although Philips Respironics also produces alternative positive air pressure equipment that are not affected by the recall, such equipment is not currently available for purchase as all such units are being deployed to replace recalled equipment. As a significant supplier in the space, the recall has led to observed supply chain constraints for such devices.

In addition, the global supply chain shortages in semiconductor microchips has impacted the manufacturing capacity of other key suppliers, further limiting our ability to procure sufficient positive air pressure equipment to meet patient demand during the year and resulting in lost revenue opportunities. The Company cannot predict the duration and severity of these supply chain issues, however a prolonged shortage could significantly affect the Company’s ability to service all patient demand for these devices and materially and adversely affect the Company’s business and results of operations.

HC LLC depends upon reimbursement from Medicare, private payors, Medicaid and patients for a significant portion of its revenue, and if it fails to manage the complex and lengthy reimbursement process, its business and operating results could suffer. A significant portion of HC LLC’s rental revenue is derived from reimbursement by third-party payors. HC LLC accepts assignment of insurance benefits from customers and, in a majority of cases, invoices and collects payments directly from Medicare, private insurance companies and Medicaid, as well as direct from patients under co-insurance provisions.

HC LLC’s financial condition and results of operations may be affected by the healthcare industry’s reimbursement process, which is complex and can involve lengthy delays between the time that a product is delivered to the consumer and the time that the reimbursement amounts are settled. Depending on the payor, HC LLC may be required to obtain certain payor-specific documentation from physicians and other healthcare providers before submitting claims for reimbursement. Certain payors have filing deadlines and they will not pay claims submitted after such time. HC LLC is also subject to extensive pre-payment and post-payment audits by governmental and private payors that could result in material delays, underpayments of negotiated amounts, refunds of monies received or denials of claims submitted for payment under such third-party payor programs and contracts. We cannot ensure that HC LLC will be able to continue to effectively manage the reimbursement process and collect payments for its products promptly. If it fails to manage the complex and lengthy reimbursement process, it could adversely affect HC LLC’s business, financial conditions and results of operations.

During the year ended June 30, 2020, we applied for and received $4.4 million in advanced payments from the CMS under their Accelerated and Advance Payment Program, which was expanded to increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic through disruption in claims submission and claims processing. This CMS program has been modified through the CARES Act to provide additional flexibilities, including extending repayment timeframes and repayment amounts. ~~During the year ended June 30, 2021, $0.9 million of these advanced payments were recouped by CMS, leaving a remaining balance of $3.5 million.~~ On October 1, 2020, the Continuing Appropriations Act, 2021 and Other Extensions Act further amended the repayment terms for all providers and suppliers who requested and received accelerated and advance payment(s) during the COVID-19 pandemic by further extending the repayment deadlines and reducing the amount of Medicare payments subject to recoupment. During the years ended June 30, 2022 and 2021, $4.1 million of these advanced payments were recouped by CMS, leaving a remaining balance of $0.3 million. If HC LLS is unable to repay the total amount of the accelerated or advance payment during this extended time-period, CMS may issue demand letters requiring repayment of any outstanding balance, subject to an interest rate of four percent consistent with the terms of the Continuing Appropriations Act, 2021.

If HC LLC fails to comply with state and federal fraud and abuse laws, including anti-kickback, physician self-referral (Stark), false claims and anti-inducement laws, it, and we, could face substantial penalties and HC LLC’s business, operations, and financial condition could be adversely affected. The federal anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federal healthcare programs. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and any remuneration to or from a prescriber or purchaser of healthcare products or services may be subject to scrutiny if it does not qualify for an exception or safe harbor. HC LLC’s practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. Failure to meet all requirements of a safe harbor is not determinative of a kickback issue but could subject the practice to increased scrutiny by the government.

The “Stark Law” prohibits a physician from referring Medicare or Medicaid patients to an entity providing “designated health services,” which includes durable medical equipment, if the physician or immediate family member of the physician has an ownership or investment interest in or compensation arrangement with such entity that does not comply with the requirements of a Stark exception. Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a non-compliant arrangement, civil penalties, and exclusion from Medicare, Medicaid or other governmental programs. Although we believe that HC LLC has structured its provider arrangements to comply with current Stark Law requirements, these arrangements may not expressly meet the requirements for applicable exceptions from the law.

Federal false claims laws prohibit any person from knowingly presenting or causing to be presented a false claim for payment to the federal government, or knowingly making or causing to be made a false statement to get a false claim paid. The majority of states also have statutes or regulations similar to the federal anti-kickback and self-referral laws and false claims laws, which apply to items or services, reimbursed under Medicaid and other state programs, or, in several states, apply regardless of payor. These false claims statutes allow any person to bring suit in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statutes) and to share in any amounts paid by the entity to the government in fines or settlement. Such suits, known as qui tam actions, have increased significantly in the healthcare industry in recent years. Sanctions under these federal and state laws may include civil monetary penalties, damages, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines and imprisonment. In addition, the recently enacted ACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes. Because of the breadth of these laws and the narrowness of the safe harbors and exceptions, it is possible that some of HC LLC’s business activities could be subject to challenge under one or more of such laws. Such a challenge, regardless of the outcome, could have a material adverse effect on its business, business relationships, reputation, financial condition and results of operations.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians. Certain states mandate implementation of compliance programs and/or the tracking and reporting of gifts, compensation and other remuneration to physicians. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may violate one or more of the requirements.

The federal Civil Monetary Penalties Law prohibits the offering or giving of remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental healthcare program. While it is HC LLC’s intent to comply with all applicable laws, the government may find that HC LLC’s marketing activities violate the Civil Monetary Penalties Law. If it is found to be in non-compliance, HC LLC could be subject to civil money penalties of up to $0.01 million for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the federal or state healthcare programs.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. If HC LLC’s operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, it, and potentially we, may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restricting of HC LLC’s operations. Any penalties, damages, fines, curtailment or restructuring of HC LLC’s operations could harm its ability to operate its business, and ultimately our financial results. Any action against HC LLC for violation of these laws, even if successfully defended against, could cause HC LLC to incur significant legal expenses and divert its management’s attention from operation of its business. Moreover, achieving and sustaining compliance with applicable federal and state fraud and abuse laws may prove costly.

Our investment management agreements may be terminated. 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. We do not control the boards of directors of such pooled investment vehicles, and they may cancel our respective IMAs at their discretion without making any termination payment to us. GECM’s investment performance is a key element of retaining this business. We have recorded an intangible asset attributable to the IMAs that is being amortized over a 15-year economic life even though the IMAs are cancellable by the respective counterparties.

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. 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.

Adverse changes could lead to a reduction in investment income, losses on our own capital invested and lower revenues from investment management fees. Such adverse changes may also lead to a decrease in new capital raised and may cause investors to withdraw their investments and commitments. Even in the absence of a market downturn, below-market investment performance by our funds and portfolio managers could reduce investment management revenues and assets under management and result in reputational damage that may make it more difficult to attract new investors or retain existing investors.

In July 2017, the Financial Conduct Authority (FCA) of the United Kingdom, which regulates the London Interbank Offered Rate (LIBOR), announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after December 31, 2021. ~~On March 5, 2021, however,~~LIBOR is not expected to be phased out entirely until 2023, and it is unclear whether new methods of calculating LIBOR will be established in the ~~FCA and ICE Benchmark Administration Limited (IBA), which is the administrator that publishes LIBOR, announced that IBA intends to cease the publication of all settings of non-U.S. dollar LIBOR and the one-week and two-month~~interim. The U.S. dollar LIBOR settings on December 31, 2021, with the publication of the remaining U.S. dollar LIBOR settings being discontinued after June 30, 2023, subject to any rights of the FCA to compel the IBA to continue publication of something called “LIBOR” that would likely be based on a different methodology and information (the ~~March 5 Announcements). In light of the expected permanent cessation of LIBOR, the~~ Federal Reserve, ~~Board of Governors has advised regulated financial institutions to cease using LIBOR~~ in ~~new transactions as soon as practicable but in all events by December 31, 2021.~~

~~We may pay interest under credit facilities, and may receive interest payments on certain investments, based on various LIBOR settings. There can be no assurance that~~conjunction with the relevant LIBOR settings will continue to be published through December 31, 2021 or June 30, 2023, as applicable. Conversely, there can be no assurance that LIBOR will not continue to be published after those dates, or that the FCA will not cause so-called “synthetic LIBOR” to be published after those dates. There also can be no assurance that LIBOR is or will remain reliable and representative of the market or economic reality that it was intended to measure, particularly should the market’s use of LIBOR decline in response to public sector guidance, market changes and industry practices. In that regard, on June 13, 2021, the Market Risk Advisory Committee (~~MRAC) of the Commodity Futures Trading Commission (the~~ ~~Commission~~) adopted a market “best practice” now being considered by the full Commission known as the “SOFR First” initiative, which is intended to hasten the market’s transition from its use and dependence on LIBOR to alternative reference rates like the Secured Overnight Financing Rate (~~SOFR). The~~ Alternative Reference Rates Committee ((the ARRC) ~~convened by the Federal Reserve Board and Federal Reserve Bank of New York has announced the SOFR as its recommended alternative to LIBOR for~~, is considering replacing U.S. dollar ~~obligations. However, because the SOFR is~~LIBOR with a ~~broad U.S. Treasury repo~~newly created index (the secured overnight financing rate, ~~that represents overnight secured funding transactions, it differs fundamentally from LIBOR.~~or SOFR), calculated based on repurchase agreements backed by treasury securities. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere. To the extent these interest rates increase, interest expense will increase. If sources of capital for us are reduced, capital costs could increase materially. Restricted access to capital markets and/or increased borrowing costs could have an adverse efect on our results of operations, cash flows, financial condition and liquidity.

Regulators, industry groups and certain committees (e.g., the ARRC) have published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., SOFR as the recommended alternative to U.S. dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments. However, at this time, it is not possible to predict whether these recommendations and proposals will be broadly accepted, whether they will continue to evolve and what the effect of their implementation may be on the markets for floating-rate financial instruments.

Funds managed by GECM, our wholly-owned subsidiary, are party to, and derive income from, other agreements that expressly provide for alternative reference rates and spread adjustments to be used in the event that LIBOR ceases to be published. Despite those provisions, the impact on such agreements of LIBOR no longer being available cannot be entirely predicted at this time. Nor can a seamless transition of such agreements from LIBOR to those alternative reference rates be guaranteed. For example, no assurance can be given that the relevant parties to such agreements will satisfy their contractual obligations to transition to alternative reference rates once LIBOR is no longer available. In addition, the alternative reference rates and spread adjustments used in such agreements could result in a net-effective interest rate that is higher or lower than that which would result from the parties’ use of LIBOR. The alternative reference rates also may be more or less volatile than LIBOR is prior to its discontinuance, which could result in an increase in the cost of our indebtedness, impact our ability to refinance some or all of our existing indebtedness, reduce income generated from assets currently referencing LIBOR, or otherwise have a material adverse impact on our business, financial condition and operations. There also can be no assurance that LIBOR transition-related legislation in the United States or abroad will not adversely impact us by, for example, materially altering, disrupting, impairing, modifying or changing the terms of any LIBOR-linked agreements to which we are a party or beneficiary.

As a result of the foregoing, we may need to renegotiate outstanding loans to our funds and their portfolio companies ~~which extend beyond 2021,~~ and that utilize LIBOR as a factor in determining the interest rate, to replace LIBOR with the new standard that is established. The situation continues to evolve and currently there is no definitive information regarding any particular replacement rate. As such, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined. The effect on our investments will vary depending, among other things, on (1) whether fallback or termination provisions in individual contracts currently exist, and if so, the terms of such provisions and (2) whether, how, and when industry participants develop and adopt new reference rates and fallbacks for both legacy and new investments. We may have discretion to determine a successor or substitute reference rate, including any price or other adjustments to account for differences between the successor or substitute reference rate and previous rate. Such successor or substitute reference rate and any adjustments selected may negatively impact the income of our investments and may expose such investments to additional tax, accounting and regulatory risks. The elimination of LIBOR may affect the value, liquidity or return on our investments and may result in costs incurred in connection with closing out positions and entering into new investments, adversely impacting our overall financial condition or results of operations. Accordingly, it is difficult to predict the full impact of the transition away from LIBOR on our businesses and investments until new reference rates and fallbacks for both legacy and new products, instruments and contracts are commercially accepted.

If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to execute our growth plans. If we are deemed to be an investment company under the Investment Company Act, we will be subject to additional regulatory requirements and our activities may be restricted, including:

Each of these may make it difficult for us to run our business. In addition, the law may impose upon us burdensome requirements, including:

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. 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.

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. 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.

We may engage in a business combination with one or more target businesses that have relationships with our executive officers, directors or existing holders which may raise potential conflicts of interest. In light of the involvement of our executive officers and directors with other entities in the investment management business and otherwise, we may decide to acquire or do business with one or more businesses affiliated with our executive officers, directors or existing shareholders.

Our directors also serve as officers and board members for other entities. 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. Potential conflicts of interest may exist, and, as a result, the terms of the business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.

Our common stock is subject to transfer restrictions. We have significant NOL carryforwards and other tax attributes, the amount and availability of which are subject to certain qualifications, limitations and uncertainties. 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. The restriction will remain until the earliest of (1) the repeal of Section 382 of the Internal Revenue Code of 1986, as amended or any successor statute if our Board determines that the restriction on transfer is no longer necessary or desirable for the preservation of tax benefits, (2) the close of business on the first day of a taxable year as to which our Board determines that no tax benefits may be carried forward, (3) such date as our Board may fix for expiration of transfer restrictions and (4) January 29, 2028. The restriction may be waived by our Board on a case-by-case basis. You are advised to carefully monitor your ownership of our common shares and consult your own legal advisors to determine whether your ownership of our common shares approaches the proscribed level.

We also have a Tax Rights Plan that would be triggered if any person acquires 4.99% or more of our common stock without prior approval by our Board. 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.

We may issue additional shares of common stock or shares of our preferred stock to obtain additional financial resources, as acquisition currency or under employee incentive plans. Any such issuances would dilute the interest of our stockholders and likely present other risks. 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. These issuances:

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. Our corporate governance documents include provisions:

These provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding 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.

Our common stockholders may experience significant dilution upon the issuance of common stock upon conversion of 5.0% Convertible Senior ~~PIK~~Payment-In-Kind Notes due 2030 (The Convertible Notes). The issuance of common stock upon conversion of some or all of the Convertible Notes will dilute the ownership interests of existing holders of shares of our common stock, which could cause the price of our common stock to decline. Furthermore, the number of shares of common stock to be issued upon conversion of the Convertible Notes may be substantially greater if the conversion rate is adjusted in accordance with the terms of the Convertible Notes. Holders of the Convertible Notes have the right to convert all or any portion of such notes at any time prior to February 22, 2030 into shares of our common stock at a conversion price of $3.4722 per ~~share~~.share. 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. We cannot predict or accurately forecast the total amount of shares of common stock that ultimately may be issued under the Convertible Notes. Further, the perception of these sales or issuances, or the conversion of the Convertible Notes, could impair our ability to raise additional capital through the sale of our equity securities.

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.

We lease additional office space for our investment management business in Charleston, South Carolina, which has a lease expiration date in October 2024.

We lease 2022 offices and ~~twelve~~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.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “GEG”.

As of September ~~1, 2021,~~6, 2022, there were 5860 record holders of our common stock.

We do not currently intend to pay dividends on our common stock. The payment of dividends in the future is subject to the discretion of our Board and will depend upon general business conditions, legal and contractual restrictions on the payment of dividends and other factors that our Board may deem to be relevant.

We have significant NOL carryforwards and other tax attributes, the amount and availability of which are subject to qualifications, limitations and uncertainties. In order to reduce the possibility that certain changes in ownership could result in limitations on the use of our tax attributes, our certificate of incorporation contains provisions which generally restrict the ability of a person or entity from acquiring ownership (including through attribution under the tax law) of 5% or more of the outstanding shares of common stock and the ability of persons or entities now owning 5% or more of the outstanding shares of common stock from acquiring additional common shares. We also have a tax benefits preservation rights plan that restricts ownership of 4.99% or more of our outstanding shares of common stock. Persons that owned more than 4.99% of our common stock when the rights plan was adopted were grandfathered as to their then-current holdings of our common stock. Our Board has granted limited waivers to certain investors to own more than 4.9% of our common stock, including funds managed by ~~MAST Capital Management, LLC (the~~ ~~MAST Funds~~), Northern Right Capital Management, L.P. (Northern Right) and Imperial Capital Asset Management, LLC (ICAM). As of September ~~1, 2021, the MAST Funds and their affiliates,~~6, 2022, Northern Right and its affiliates and ICAM and its affiliates own approximately ~~7.5%, 9.7%~~12.0% and ~~10.0%~~17.6%, respectively, of the outstanding shares of our common stock. Ownership information is based on information in publicly available filings.

The information required by Item 201(d) of Regulation S-K will be contained in our Proxy Statement and is hereby incorporated by reference thereto.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations is a supplement to, and should be read in conjunction with, and is qualified entirely by, our consolidated financial statements (including Notes to the Consolidated Financial Statements) and the other consolidated financial information appearing elsewhere in this report. 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.

The ~~Company’s revenues~~Company continued to ~~be adversely impacted by~~experience suppressed revenues relative to its pre-pandemic expectations due to the continuing impact of the COVID-19 pandemic. ~~Beginning in March 2020,~~In particular, the ~~Company experienced a decrease in~~investment management business continues to experience reduced assets under management in our managed portfolios ~~within the investment management business and observed higher patient cancellation rates for attended sleep studies~~as compared to pre-pandemic levels. COVID-19 may continue to impact such managed portfolios as well as ~~softer patient referral pipelines for~~the value of the shares of GECC held by the Company in the future. In addition, COVID-19 may impact our ability to finance and execute new ~~medical device set-ups within~~acquisitions or other business opportunities.

At our durable medical equipment ~~business.~~ 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. 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. Our equipment allotments from key suppliers has resulted in a patient backlog, resulting in missed revenue opportunities.

The impact of COVID-19 ~~continues~~as well as global supply chain challenges continue to evolve and ~~its~~their duration and ultimate disruption to the Company’s customers and to its operations cannot be estimated at this time. ~~Should~~However, the ~~disruption~~Company expects some level of missed revenue opportunities to continue ~~for an extended period of time, it could have a more severe adverse effect on our business and operations.~~

~~In addition, COVID-19 may impact our ability to act on new acquisitions or other business opportunities.~~

~~The Company prioritizes~~in the health and safety of employees and customers. Beginning in early March 2020, all employees at our headquarters as well as certain employees of HC LLC moved to a remote-working model. In addition, the officers of GEG have maintained regular communications with key service providers, including legal and accounting professionals, other consultants and vendors, noting that those firms have similarly moved to remote-working modelsnear future due to the extent possible. Such employees and key service providers have been able to effectively transition to working remotely while maintaining a consistent level of capabilities and service, however, we will continue to monitor and make adjustments as necessary. continually developing supply chain challenges noted above.

At HC LLC we invested in virtual patient set-ups which allow our respiratory therapists to interact with patients by video to maintain social distance. Certain other employees whose responsibilities have been impacted by social distancing have been temporarily redeployed within the organization.

We cannot predict the full impact of the COVID-19 pandemic, including its duration in the United States and worldwide and the magnitude of the economic impact of the outbreak, particularly with respect to the travel restrictions, business closures and other quarantine measures imposed on our employees, suppliers and service providers by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities. As such, we are unable to predict the duration of any business and supply-chain disruptions, the extent to which the COVID-19 pandemic will negatively affect our operating companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition.

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). 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.

Asset Acquisitions and Business Combinations, Acquired Intangible Assets and Goodwill

~~Business~~Asset acquisitions are accounted for using the cost accumulation method while business combinations are accounted for at fair value. ~~The~~Determining whether the acquired set represents an asset acquisition or a business combination requires quantitative and qualitative assessments that require judgment. If determined to be a business combination, the accounting ~~for business combinations~~ 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. Goodwill represents the excess of fair value over identifiable tangible and intangible net assets acquired in business combinations. Goodwill is not amortized. 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.

The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including projected financial information, effective income tax rates, present value discount factors, and long-term growth expectations. 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. 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. Based on our annual impairment test as of April 1, ~~2021~~2022 the fair value of the durable medical equipment reporting unit exceeded the carrying value by ~~73.0%~~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. The discount rate used in this analysis was ~~15.5%~~13.0%.

Substantially all of the accounts receivable balance relates to the durable medical equipment business. 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. 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. 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. 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. 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. 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 from a customer consists of any combination of the sale and rental of durable medical equipment and/or the provision of sleep study services. 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.

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~~priced; thus they each represent a single performance obligation. 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.

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. 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.

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. 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. 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. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain Payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial. 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 durable medical equipment sales and services revenues or durable medical equipment rental income, as applicable.

The Company recognizes revenue from its investment management business at amounts that reflect the consideration to which it expects to be entitled in exchange for providing services to its customer. 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.

Because of the uncertainty of when incentive fees will be collected due to market conditions and investment performance, incentive fees are fully constrained and not recorded until received and the probability of significant reversal of the fees is eliminated in accordance with the respective investment management agreements. As of June 30, ~~2021,~~2022, the Company had ~~$9.7 million in~~no cumulative earned but constrained incentive fee revenue. ~~To the extent such constrained incentive fees are collected in the future, they could result in significant increases to future investment management revenue.~~

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. 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. To the extent that the Company generates taxable income in the future, the reversal of valuation allowances could generate significant tax benefits to future operations. As of June 30, ~~2021,~~2022, the Company has a valuation allowance of ~~$231.8~~$207.1 million.

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 Company records estimated reserves for exposures associated with positions that it takes on its income tax returns that do not meet the more likely than not standards.

The following discussion is reflective of our two business operating segments: durable medical equipment and investment management. General corporate represents unallocated costs and activity to arrive at consolidated operations. Activity not allocated to the segments include, but are not limited to, certain passive investment and corporate financing activities, professional fees, costs associated with being a public company, acquisition costs and costs associated with executive and corporate management departments, including compensation, benefits, rent and insurance. During the fiscal year ended June 30, ~~2020~~2021 we sold our ~~real-estate~~real estate business. See “Discontinued Operations” ~~below~~above for more information.

The following table provides the results of our consolidated ~~operations~~operations:

Revenues for the ~~years~~year ended June 30, ~~2021~~2022 included $63.5 million from the durable medical equipment business and ~~2020:~~

~~Revenues~~$4.5 million from the investment management business, while revenues for the year ended June 30, 2021 included $57.6 million from the durable medical equipment business and $3.2 million from the investment management ~~business, while revenues for the year ended June 30, 2020 included $55.7 million from the durable medical equipment business and $3.3 million from the investment management~~ business. The increase in total revenue for the year ended June 30, ~~2021~~2022 as compared to the year ended June 30, ~~2020~~2021 is primarily attributable to contributions from the acquisition of Advanced Medical DME, LLC and PM Sleep Lab, LLC (collectively, AMPM) in March 2021 and ~~organic growth~~of MedOne Healthcare LLC (MedOne) in resupply sales within the durable medical equipment business. These increases were partially offset by decreases in durable medical equipment rentals due to the continued suppressed referral pipeline for new equipment set-ups and increased revenue reserve constraints,August 2021, as well as ~~decreases~~improvements in ~~management fees earned~~revenue reserves resulting from ~~our investment management business.~~investments in the credit and collections process in the prior years. Investment management revenues ~~decreased $0.1~~also increased $1.4 million related to ~~lower~~increases in assets under management ~~fees earned on managed portfolios during~~at GECC as compared to the ~~year.~~prior periods as well as contributions from the acquisition of the Monomoy REIT management agreement in May 2022.

The increase in operating expenses of $7.6 million for the year ended June 30, ~~2021~~2022 as compared to the year ended June 30, ~~2020 is primarily attributable to~~2021 consists of increases of $1.8 million at ~~the~~our durable medical equipment business ~~due~~related to the operations of AMPM ~~contributions~~ and ~~increased COVID-19-related~~MedOne and related transaction and integration costs, as well as ~~an increase in compensation~~increases of $3.4 million at ~~the~~our investment management ~~segment.~~business related to increased consulting costs on our managed products and the workforce acquired to manage the Monomoy REIT. In addition, the year ended June 30, 2022 includes $2.4 million in Employee Retention Credits (ERCs) claimed during such period under the enhanced CARES Act, primarily at our durable medical equipment business. This compares to $4.8 million in ERCs claimed during the year ended June 30, 2021.

Interest expense increased $0.8 million for the year ended June 30, ~~2021~~2022 as compared to the year ended June 30, ~~2020~~2021 due primarily to ~~issuance of~~current period interest on the $35.8 million face value externally-held preferred stock in Forest ~~Investments, Inc. (Forest~~), and HC LLC which were issued in December 2020. In conjunction with the issuance of this preferred stock, we extinguished a term loan which had $24.8 million in principal outstanding on December 29, 2020 and paid down outstanding balances on our revolving credit facility of $0.3 million. Additionally, $0.2 million of the ~~Convertible~~increase relates to recently issued GEGGL Notes and Seller Note (both issued in ~~February 2020.~~May 2022 and defined below under "Borrowings").

Other income (expense) typically consists of dividend income and net unrealized gain (loss) on investments. The year over year net increase is primarily attributable to the net realized and unrealized ~~gain~~gains and losses on our investment in GECC and private funds which is discussed under “—Investment Management” below. In addition, the Company recognized approximately ~~$1.9~~$0.2 million in losses on extinguishment of ~~debt~~redeemable preferred stock during the year ended June 30, ~~2021. There was no corresponding activity in~~2022, as compared to a loss of $1.9 million on extinguishment of the ~~prior~~Corbel Facility during the year ~~presented in the table above.~~ended June 30, 2021.

The following table provides the results of our durable medical equipment ~~business.~~business:

In March 2021, the Company acquired AMPM, expanding our geographical footprint throughout Kansas and Missouri. From acquisition thru June 30, 2021, AMPM contributed approximately $1.5 million in revenues to our durable medical equipment business.

~~Durable medical equipment revenues include revenue from the sale of medical equipment, sleep study services and medical equipment rentals.~~ For the year ended June 30, ~~2021,~~2022, revenues from the sale of medical equipment and sleep study services were ~~$32.3~~$36.2 million and ~~$5.1~~$5.6 million, respectively, compared to ~~$28.9~~$32.3 million and ~~$5.3~~$5.2 million, respectively, ~~during~~for the year ended June 30, ~~2020.~~2021. The increases are primarily attributable to contributions from the acquisitions of AMPM in March 2021 and of MedOne in August 2021.

Revenue from medical equipment rentals was $21.7 million for the year ended June 30, 2022 as compared to $20.2 million for the year ended June 30, ~~2021 as compared~~2021. The increases relate to ~~$21.5 million~~contributions from AMPM.

The results for the year ended June 30, ~~2020. The decrease is~~2022 were hindered by global supply chain issues which significantly restricted our ability to procure continuous positive airway pressure (CPAP) equipment, resulting in lost revenue opportunities during the periods primarily ~~attributable~~related to ~~the continued suppressed referral pipeline for new equipment set ups, partially offset by AMPM contributions.~~

~~Due to the COVID-19 pandemic, we have seen continued softness in our sleep study services due primarily to potential patients putting off perceived non-essential health care services.~~

~~In addition, a portion of our equipment~~CPAP sales and ~~rentals are dependent on~~CPAP rentals. We expect these global supply chain issues to persist in the ~~availability and accessibility of primary physicians~~near term but continue to ~~patients. If patients are unable~~work with key suppliers to ~~access their physicians or otherwise delay seeking medical attention for their conditions,~~minimize the impact to our ~~referral pipeline for new patient set-ups and related sales and rental revenues are adversely impacted.~~business.

Cost of goods sold includes inventory costs for medical equipment sold and direct costs associated with running sleep study services, including staff compensation to perform the studies and the purchase of supplies used in the studies. Cost of rentals includes depreciation on medical equipment held for lease and costs related to maintenance expenses. ~~The increases in these costs for the~~Margins on both sales and services as well as rentals increased year ~~ended June 30, 2021 as compared to the~~over year ~~ended June 30, 2020 are~~ primarily due to ~~the increases~~revenue reserve improvements of $2.4 million achieved through strategic investments into our revenue cycle management processes in the prior year. The benefit of these improvements on rental margins were partially offset by vendor surcharges implemented to address increased costs related ~~revenues and sales volumes, along with higher sales on lower margin products including resupply revenue versus higher margin services such as sleep studies.~~to ongoing global supply chain issues.

General and administrative expenses consist of employee-related, facility-related, freight and shipping, ITinformation technology and other costs. For the ~~years~~year ended June 30, 2022 and 2021, general and ~~2020, these amounts are net~~administrative expenses at our durable medical equipment business include benefits of ~~government stimulus received under the CARES Act of~~$2.3 million and $4.6 million, ~~and $5.1 million, respectively. Excluding such stimulus,~~respectively, related to ERCs claimed during each period. Exclusive of these benefits, employee-related costs were $24.5 million and $22.5 million for the year ended June 30, 2022 and ~~$20.7 million,~~2021, respectively. The $2.0 million increase in employee related costs is primarily due to ~~additional payroll-related~~ costs relating to acquired AMPM ~~employees~~ and ~~the conversion of certain consultants into full-time~~MedOne employees. Facility-related expenses ~~were~~for the year ended June 30, 2022 of $3.4 million ~~and $3.1 million, respectively,~~remained consistent with ~~increases mainly due to expansion through~~prior year, as incremental footprint of AMPM acquisition ~~and~~was offset with reduced rental expense on leases renewed office space leases during the ~~build out of existing locations, along with increased costs related to~~ COVID-19 ~~including social distancing modifications and enhanced cleaning protocols.~~pandemic. Freight and shipping ~~costs were~~expense also remained consistent with prior year at $1.7 million. Information technology expense increased by $0.2 million ~~and $1.4~~to $2.4 million ~~respectively, with increases primarily~~during the year ended June 30, 2022 as compared to the prior year related to ~~remote patient set-ups that were previously performed in person prior to the pandemic. Information technology costs were $2.2 million~~software support for acquired AMPM and ~~$2.0 million, respectively, with increases due to the AMPM acquisition.~~MedOne employees. Other costs ~~were $3.7~~of $3.3 million for the year ended June 30, 2022 decreased by $0.3 million as compared to $3.6 million in the prior year primarily attributable to reduced professional fees.

Depreciation and ~~$4.0 million, primarily consisting~~amortization includes the depreciation of ~~professional fees,~~fixed assets, excluding depreciation on the equipment held for rental, which is included in the cost of rentals, and amortization of the intangible assets resulting from the acquisition of the durable medical equipment businesses. Depreciation and amortization for the year ended June 30, 2022 decreased slightly as ~~certain consultants were converted into full-time employees, as noted above.~~we reduced discretionary capital expenditures during the year.

Transaction costs increased for the year ended June 30, ~~2021~~2022 as compared to the prior period as they primarily relate to one-time expenses incurred in the acquisition of ~~AMPM~~MedOne in the current year ~~whereas no acquisitions were noted~~and AMPM in the prior ~~period.~~year.

~~In addition~~Interest expense increased to $5.0 million for the year ended June 30, 2022 as compared to $4.0 million in the prior year. The increase is attributable primarily to higher outstanding principal balances of the HC LLC preferred stock of $38.1 million as compared to $25.1 million outstanding under the Corbel Facility and DME Revolver (both as defined below under "Borrowings") prior to the ~~operating costs and expenses, we recognized interest expense~~refinancing in December 2020.

Other income (expense) includes recurring fair value adjustments of ~~$4.0 million and 3.7 million for~~an embedded derivative in the HC LLC Series A-2 preferred stock issued to Forest, as well as debt extinguishment costs. During the years ended June 30, 2022 and 2021, the durable medical equipment business recognized a charge of $2.1 million and ~~2020, respectively. The increase is primarily~~a gain of $0.7 million, respectively, related to the ~~issuance~~embedded derivative valuation. These charges and benefits have an off-setting impact in our General Corporate activity and are eliminated in consolidation. In addition, for the year ended June 30, 2021, our durable medical equipment business recognized a non-cash charge of ~~$44~~$0.9 million inrelated to write-offs of unamortized discounts and deferred financing costs upon the redemption of $6.0 million par value HC LLC Series A-1 ~~Preferred Stock~~preferred stock. $4.2 million of these redemptions related to HC LLC Series A-1 preferred stock held by Forest, and ~~Series A-2 Preferred Stock~~therefore $0.7 million of these non-cash charges are reflected as an offsetting benefit in ~~December 2020, a refinancing that retired the previously outstanding term loan of $26 million.~~

~~Other income (expense) primarily consists of~~our General Corporate activity and eliminates in consolidation. This compares to a debt extinguishment charge of $1.9 million inrecorded during the ~~current~~ year ended June 30, 2021 related to the paydown of the ~~term loan~~Corbel Facility in December 2020. ~~This charge is partially offset by a $0.7 million gain recorded to mark an embedded derivative on the Series A-2 Preferred Stock to fair value as of June 30, 2021.~~

Investment management revenues include management fees, property management fees and administration fees related to services provided to certain managed investment vehicles. For the years ended June 30, ~~2021~~2022 and ~~2020,~~2021, we recognized ~~$2.7~~$3.6 million and ~~$2.8~~$2.7 million, respectively, of management fee revenue and ~~$0.5~~$0.7 million and ~~$0.5~~$0.6 million, respectively, of administration fee revenue. The ~~decrease~~increase in management fee revenue for the year ended June 30, ~~2021~~2022 as compared to the year ended June 30, ~~2020~~2021 is attributable to ~~decreases~~higher assets under management at GECC related to market recoveries and the successful completion of rights offerings and $0.3 million of management fees earned the Monomoy REIT management agreement, which was acquired in ~~the average assets on which such fees are calculated.~~May 2022. Administration ~~fees~~fee revenue for the year ended June 30, ~~2021 were consistent~~2022 increased as compared to the prior year primarily related to higher administrative costs to manage GECC. In conjunction with the ~~administration~~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, ~~2020.~~2022.

~~Stock-based~~Non-cash compensation costs increased $1.1 million for the year ended June 30, ~~2021~~2022 as compared to the year ended June 30, ~~2020 as~~2021. The increase includes $0.6 million in charges upon the final discretionary vesting of 5-year performance awards initially granted in November 2016. In addition, ad-hoc awards were granted upon the acquisition of the Monomoy REIT management agreement in May 2022 and annual awards were granted to the investment team in September 2021, whereas no awards were granted to the investment team in the prior ~~period benefit includes changes in estimates related to performance-based awards.~~year.

GECM had a consulting agreement with a third party to provide services in exchange for 26% of the fees earned from the management of GECC, excluding incentive fees. The consulting agreement expired in November 2019, as such no such consulting fees were incurred for year ended June 30, 2021.

Other general and administrative costs consist primarily of ~~employee-related, facility-related,~~ professional fees, facilities and other overhead costs, and payroll and related costs, excluding ~~stock-based~~non-cash compensation. The $2.1 million increase in general and administrative costs for the year ended June 30, ~~2021 as compared to the year ended June 30, 2020~~2022 is primarily attributable to an increase in allocated payroll costs, bonus accruals and consulting fees including the ~~increases~~assembled workforce acquired in ~~employee-related costs and professional fees related to investment~~conjunction with the Monomoy REIT management ~~growth initiatives.~~ agreement.

Other income and expense primarily consisted of dividend income and realized/unrealized gains or losses on the Company’s managed investments in GECC, Monomoy UpREIT and the underlying investments of our consolidated fund GESOF. Dividend income on managed investments for the years ended June 30, 2022 and 2021 was $2.8 million and ~~2020 was~~ $3.0 million, respectively. In addition, we recognized net realized and ~~$2.1~~unrealized losses of $7.8 million ~~respectively. We recognized unrealized~~during the year ended June 30, 2022 as compared to net gains of $0.7 million ~~and unrealized losses of $8.7 million, respectively, for~~during the ~~years~~year ended June 30, ~~2021 and 2020.~~2021. We mark-to-market our investment in GECC and underlying investments of GESOF by reference to the closing price of related investments on Nasdaq or other exchanges, as applicable, as of each period end. Our investment in Monomoy UpREIT is adjusted quarterly based on net asset value as supported by recurring property valuations.

For the years ended June 30, 2022 and 2021, ~~and 2020, all~~General Corporate revenue ~~was derived from~~consists of fees earned by Great Elm DME Manager, LLC (DME Manager), a subsidiary in our general corporate segment, ~~which provides~~for consulting services provided to HC LLC, a subsidiary in our durable medical equipment segment. In addition to this revenue, ~~the year ended June 30, 2021, revenue includes $0.2 million in fees earned by~~ DME Manager ~~relating to~~earns fees for consulting services provided to our consolidated subsidiary, Forest. These intercompany revenues and corresponding expenses are eliminated in consolidation.

~~Our~~Non-cash compensation of $1.3 million during the year ended June 30, 2022 reflects an increase of $0.3 million as compared to the prior year, and relates primarily to the election by our directors to receive their compensation entirely in the form of shares instead of cash.

Transaction costs primarily consist of professional fees in connection with our acquisitions of businesses as well as diligence for potential future opportunities.

Other general and administrative costs primarily consisted of professional fees, employee-related and facility-related costs for our finance, legal and other administrative functions as well as professional fees and payroll costs in connection with our diligence efforts towards identifying asset and business acquisition opportunities. ~~Excluding~~These costs remained relatively flat, increasing $0.1 million during the ~~non-recurring benefit in~~year ended June 30, 2022 as compared to the prior year of $1.1 million related to the change in fair value of contingent consideration, other general and administrative expenses at Corporate decreased $1.7 million or 27% year over year as management focused on vendor management and controlling overhead costs. The decrease in general and administrative fees is largely derived from the $1.0 million decrease in external audit fees attributable to our change in auditors in the prior year, $0.6 million decrease in employee-related costs as allocable employees focused their attention on our operating segments, and a $0.3 million reduction in board costs as certain directors elected to take their cash compensation in the form of stock awards (this results in a corresponding increase to stock-based compensation). This increase is partially offset by $0.2 million in Forest management fees.year.

Interest expense primarily consists of interest on the Convertible Notes issued in March 2020, as well as on Forest Preferred Stock, which was issued in December 2020. Interest ~~expenses~~expense increased ~~for~~$2.1 million during the year ended June 30, ~~2021~~2022 as compared to the year ended June 30, ~~2020 as it includes a full year~~2021 primarily due to the fact that the Forest preferred stock was only outstanding for six months during the prior year. In addition, the Company issued $26.9 million in face value GEGGL Notes in May 2022 which incurred $0.2 million of interest onduring the ~~Convertible Notes and six months of interest on the preferred stock, whereas the prior~~ year ~~includes only four months of interest on the Convertible Notes.~~ended June 30, 2022.

Other income (expense) during the ~~current year is comprised of~~years ended June 30, 2022 and 2021 includes intercompany interest income of $4.7 million and $2.4 million, respectively, related to Forest's investments in HC LLC preferred stock. ~~This amount is partially offset by a $0.7 million charge related to changes~~Changes in the valuation of the embedded ~~derivative.~~derivative in the HC LLC Series A-2 preferred stock resulted in a benefit of $2.1 million and a charge of $0.7 million during the years ended June 30, 2022 and 2021, respectively. This income has corresponding ~~charges~~and offsetting impacts in the durable medical equipment business and such impacts are eliminated in consolidation. ~~Since~~Other income (expense) includes dividends earned and net gains/losses on passive investments. Prior to the acquisition of the Monomoy REIT management agreement in May 2022, the Company held a passive investment in the Monomoy Fund. Dividends and gains on this investment were $0.7 million during the year ended June 30, 2022. Lastly, during the year ended June 30, 2022 General Corporate activity included a $0.8 million benefit related to the redemption of $4.8 million of HC LLC Series A-1 preferred stock ~~was issued~~held by Forest, which has an offsetting charge in ~~December 2020, there is no corresponding activity in the prior year.~~our durable medical equipment business.

We do not expect that we will owe any federal taxes for the ~~year~~years ended June 30, 2022 and 2021, ~~or 2020,~~ however, we ~~are required to provide intra period~~provided for intraperiod taxes allocated between continuing operations and discontinued ~~operations.~~operations during the year ended June 30, 2021 related to our sale of our real estate business. 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 ~~intra period~~intraperiod allocations. ~~No intraperiod allocations were made in 2020.~~ State and local taxes were approximately ~~$1.4~~$0.02 million and ~~$0.1~~$1.7 million for the ~~year~~years ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. State tax provisions during the year ended June 30, 2021 are primarily attributable to discrete taxable entity re-organization transactions at HC LLC and Great Elm Capital GP, LLC.

On June 23, 2021, the Company’s majority-owned indirect subsidiary Great Elm FM Acquisition, Inc., entered into an agreement with Monomoy Properties Fort Myers, LLC (Monomoy FM) to sell the Company’s real estate business to Monomoy FM for $4.6 million in cash. The real estate business consists of majority-interests in two Class A office buildings totaling 257,000 square feet situated on 17 acres of land in Fort Myers, Florida. The Company acquired the real estate business in March 2018 for $2.7 million. After transaction costs, the gain on the sale was $0.3 million.

Operations of the discontinued real estate business were relatively flat year over year. Upon sale of the business on June 23, 2021, we recognized a gain on sale of $0.3 million. In addition, we also recorded a tax benefit of $0.1 million related to intraperiod tax allocations to the discontinued operations.

As of June 30, ~~2021,~~2022, we have cash of ~~$24.4~~$23.6 million and investments with a fair value of ~~$24.0~~$48.0 million.

We intend to make acquisitions that will likely result in our investment of all of our liquid financial resources, the issuance of equity securities and the incurrence of indebtedness. If we are unsuccessful at raising additional capital resources, through either debt or equity, it is unlikely we will be able execute our strategic growth plan. See “Item 1A. 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. 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.

Cash flows used in operating activities totaled $19.0 million ~~and cash flows provided by operating activities totaled $13.2 million~~ for the ~~years ended~~ June 30, ~~2021 and 2020, respectively. For the year ended June 30, 2021, net~~2021. Net cash used in operating activities consisted primarily of the net loss of ~~$8.7~~$7.9 million and ~~purchase~~net purchases of investments ~~totaling $31.4~~of $25.5 million, partially offset by $8.7 million in non- cash depreciation and amortization, ~~$5.8 million in sales of investments by our consolidated funds, $2.5~~$1.9 million in non-cash interest and amortization and loss on extinguishment of debt of $1.9 million. For the year ended June 30, 2020, net cash provided by operating activities consisted primarily of the net loss of $13.1 million offset by $4.4 million in CMS advanced payments included in deferred revenue and non-cash activity, including $10.8 million in depreciation and amortization and $8.7 million in unrealized loss on our investment in GECC.

Cash Used in Investing Activities. Cash flows used in investing activities totaled ~~$15.5~~$40.0 million ~~and $6.6 million~~ for ~~the years ended June 30, 2021, and 2020, respectively. For~~ the year ended June 30, ~~2021,~~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 totaled $15.5 million for the year ended June 30, 2021. Net cash used in investing activities primarily consists of $6.7 million in purchases of equipment held for rental, $8.8 million in participation in related party rights offering and $4.7 million purchases of investments, partially offset by $4.4 million in net proceeds received from the sale of the real estate business. ~~For~~

Cash Provided by Financing Activities. Cash flows provided by financing activities totaled $10.0 million for the year ended June 30, ~~2020, net cash used in investing activities~~2022 and primarily ~~consists~~consisted of ~~$8.1 million in purchases of equipment held for rental which was partially offset by $1.8~~$26.9 million in proceeds from the ~~sale~~issuance of ~~equipment held for rental.~~the GEGGL baby bonds. This was partially offset by approximately $11.4 million in cash outflows related to the change in due to broker of the consolidated fund and $3.9 million in distributions made to non-controlling interests of GESOF.

~~Cash Provided by Financing Activities.~~ Cash flows provided by financing activities totaled $18.3 million ~~and $21.8 million~~ for ~~the years ended June 30, 2021 and 2020, respectively. For~~ the year ended June 30, ~~2021, net~~2021. Net cash inflows primarily consisted of $37.7 million in gross proceeds from the JPM Transaction, $11.2 million in margin borrowing due to broker from investment purchases in the consolidated funds, capital contributions from non-controlling interests in the consolidated funds of $4.8 million and $3.6 million in proceeds from new equipment financing debt. Such inflows were partially offset by principal payments of $33.4 million on our debt, $1.6 million in debt extinguishment costs and capitalized issuance costs of $1.3 million in connection with the JPM Transaction. For the year ended June 30, 2020, cash inflows of $30.0 million were provided by the issuance of Convertible Notes, partially offset by net principal payments of $5.3 million on our long-term related party notes payable, revolving line of credit and equipment financing and payment of debt issuance costs.

As of June 30, ~~2021~~2022, the Company had ~~$34.3~~$26.9 million in outstanding aggregate principal of 7.25% Notes due 2027 (the GEGGL Notes). 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 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. To date, all interest on these instruments have been paid-in-kind.

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. 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.

As of June 30, ~~2021,~~2022, GECM had a $6.3 million promissory note related to the purchase of the Monomoy REIT investment management agreement (the Seller Note). The Seller Note is due on August 4, 2023 and is payable at GECM’s option with either cash, GECC shares owned by GEG, or newly issued GEG shares (subject to shareholder approval). There are no prepayment penalties. The Seller Note bears interest at 6.5%, which is paid quarterly.

As of June 30, 2022, JPM held $35.0 million face value in shares of Forest Preferred Stock. The shares provide for a 9% annual dividend, which is payable quarterly. The shares are mandatorily redeemable by the Company at their face value of $1,000 per share on December 29, 2027, or at a 0-3% premium decreasing over time based upon the occurrence of certain redemption events prior to December 29, 2027. The redemption events include the occurrence of an ownership change that triggers an IRC § 382 limitation which reduces Forest net operating loss carryforwards to less than $300 million. The shares are redeemable at any time at the option of Company at a redemption price at face value plus the 0-3% premium then in place. The shares rank senior and have preference to the common shares of Forest. The shares are non-voting, do not participate in the earnings of Forest and contain standard protective rights.

As of June 30, ~~2021,~~2022, Corbel and VHG, both related parties, held a combined ~~$2.0~~$0.8 million in face value of shares of HC LLC Series A-1 Preferred Stock. The shares provide for a 9% annual dividend, which is payable quarterly. The shares are mandatorily redeemable by the Company at their face value of $1,000 per share on the earlier of certain redemption events or December 29, 2027. The redemption events include a bankruptcy, change in control or sale of the durable medical equipment business. The shares are redeemable at any time at the option of the Company at a redemption price equal to face value. The shares rank senior and have preference to the common shares of HC LLC. The shares are non-voting, do not participate in the earnings of HC LLC and contain standard protective rights.

The HC LLC Series A-1 Preferred Stock includes covenants that limit additional indebtedness, liens, asset dispositions and investments, require compliance and maintenance of licenses and government approvals and other customary conditions. In order to incur certain additional debt, HC LLC must also comply with a leverage ratio and levered free cash flow ratio, which are based in part on the HC LLC EBITDA levels.

As of June 30, ~~2021,~~2022, we had an undrawn credit facility with ~~Pacific Mercantile Bank~~Banc of California that accrues interest at the prime rate plus 0.4% (at June 30, ~~2021,~~2022, the effective rate was ~~3.7%~~5.2%) through maturity on November 29, 2022 (the DME Revolver). The DME Revolver allows for borrowings up to $10 million. The DME Revolver requires monthly interest payments. The DME Revolver is secured by all of the assets of the durable medical equipment business and the Company is required to meet certain financial covenants.

The DME Revolver includes covenants that restrict HC LLC business operations to its current business, limit additional indebtedness, liens, asset dispositions and investments, require compliance and maintenance of licenses and government approvals and other customary conditions. Events of default include the failure to pay amounts when due, bankruptcy, or violation of covenants, including a change in control of HC LLC. HC LLC must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the HC LLC EBITDA levels. The Company was in compliance with all material covenants and restrictions at June 30, ~~2021.~~ 2022.

HC LLC’s operating subsidiaries also utilize equipment financing debt to fund certain inventory and equipment purchases from suppliers. These equipment financing debt agreements are entered into with 3rd party banks and are generally payable in equal installments over terms of one to three years, depending on the nature of the underlying purchases being financed. The debt is secured by the inventory and equipment, as applicable, of the operating subsidiaries entering into the agreements, and the long-term agreements have implicit interest rates between 7 – 8%. As of June 30, ~~2021,~~2022, the Company had ~~$2.0~~$3.0 million in equipment financing debt outstanding.

~~On March 27, 2020, the President of the United States passed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Section 1102 of the CARES Act, the Paycheck Protection Program Loan (PPP Loan~~) provided additional funding for small businesses, as defined by the Small Business Act, to keep workers employed during through the COVID-19 crisis. In April 2020, our 80.1% owned subsidiary Great Elm DME, Inc. applied for and received $3.6 million in PPP Loans. Proceeds can only be used for specified covered purposes including payroll, rent and utilities in accordance with the CARES Act. Between funding and June 30, 2020, the Company spent these proceeds on covered purposes and has recognized the proceeds as a reduction to operating expenses. During the year ended June 30, 2021, the Company submitted a forgiveness application to the lender seeking full forgiveness of the PPP Loan, which was approved by the SBA.

The ability of HC LLC to pay dividends is subject to compliance with the restricted payment covenants under the DME Revolver.

As of June 30, ~~2021,~~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.

See Note 2 – Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.

The information required by this Item appears beginning on page F-1 of this Annual Report on Form 10-K and is incorporated in this Item 8 by reference.

Per Rule 3-09 of Regulation S-X, the audited financial statements of GECC for the years ended December 31, ~~2020~~2021 and ~~2019~~2020 included in GECC’s annual report on Form ~~10-K~~10-K/A (File No. 814-01211), filed with the SEC on ~~March 16, 2021~~April 19, 2022 are incorporated herein by reference. We include the financial statements of GECC because our investment in GECC met the test of significance under Rule 3-09 in Regulation S-X. The management of GECC is responsible for the form and content of GECC’s financial statements. Certain officers and directors of GECC are also officers and directors of GEG. ~~Mr. Reed~~Matthew A. Drapkin is a director of our ~~Chief Executive Officer as well as~~Board and also the ~~Chief Executive Officer~~Chairman of ~~GECC~~GECC's Board of Directors, and ~~Mr.~~Adam M. Kleinman is our President ~~and Chief Operating Officer~~ as well as the Chief Compliance Officer of GECC. ~~GECM serves as the investment advisor to GECC.~~

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

The Company’s management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective as of June 30, ~~2021.~~2022.

Our management is responsible for preparation of the accompanying consolidated financial statements in accordance with US GAAP.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13(a)-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting is supported by written policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2021 as required by the Exchange Act. In making this assessment, we used the criteria set forth in the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s evaluation under the framework, management concluded that Great Elm Group, Inc.’s internal control over financial reporting was effective as of June 30, ~~2021.~~2022.

There have been no changes in our internal control over financial reporting during the fiscal quarter ended June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The information required by Items 401, 405, 406, and 407(c)(3), 407(d)(4) and 407(d)(5) of Regulation S-K will be contained in our definitive proxy statement (our Proxy Statement) and is hereby incorporated by reference thereto.

The information required by Items 402, 407(e)(4) and 407(e)(5) of Regulation S-K will be contained in our Proxy Statement and is hereby incorporated by reference thereto.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 201(d) and Item 403 of Regulation S-K will be contained in our Proxy Statement and is hereby incorporated by reference thereto.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by Item 404 and Item 407(a) of Regulation S-K will be contained in our Proxy Statement and is hereby incorporated by reference thereto.

The information required by Item 9(e) of Schedule 14A will be contained in our Proxy Statement and is hereby incorporated by reference thereto.

The information required by this Item appears beginning on page F-1 of this Annual Report on Form 10-K and is incorporated in this Item 15 by reference.

Schedules are omitted because they are not required or are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

The exhibit index attached hereto is incorporated by reference. We will furnish any exhibit upon request made to our Corporate Secretary, 800 South Street, Suite 230, Waltham, MA 02453. We charge $0.50 per page to cover expenses of copying and mailing.

We will furnish any exhibit upon request made to our Corporate Secretary, 800 South Street, Suite 230, Waltham, MA 02453. We charge $0.50 per page to cover expenses of copying and mailing.

Unless otherwise indicated, all references are to filings by Great Elm Group, Inc. (the Registrant) with the Securities and Exchange Commission under File No. 001-39832

*Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. GEG hereby undertakes to furnish supplementally a copy of any omitted schedule or exhibit upon request by the Securities and Exchange Commission.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of September ~~20, 2021.~~12, 2022.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of September ~~20, 2021.~~12, 2022.

We have audited the accompanying consolidated balance sheets of Great Elm Group, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, ~~2021~~2022 and ~~2020,~~2021, the related consolidated statements of operations, stockholders’ equity and contingently redeemable non-controlling interest, and cash flows for each of the two years in the period ended June 30, ~~2021,~~2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended June 30, ~~2021,~~2022, in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit ~~matters~~matter communicated below ~~are matters~~is a matter arising from the current period audit of the financial statements that ~~were~~was communicated or required to be communicated to the audit committee and that: (1) ~~relate~~relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit ~~matters~~matter below, providing a separate ~~opinions~~opinion on the critical audit ~~matters~~matter or on the accounts or disclosures to which ~~they relate.~~it relates.

As described further in notes 2 and 3 to the financial statements, and disclosed in the consolidated statement of operations, the Company recorded ~~$60.9~~$68.0 million of total revenues for the year ended June 30, ~~2021,~~2022, of which ~~$57.6~~$63.5 million related to the Durable Medical Equipment operating segment.

The Company’s revenue is recorded based on the amount that the Company expects to receive in exchange for the goods or services provided, which consists of the transaction price net of estimates for variable consideration. Actual amounts of consideration ultimately received may differ from the Company’s initial estimates. We identified the estimation of the variable consideration within the Durable Medical Equipment revenue streams as a critical audit matter.

The principal considerations for our determination that variable consideration is a critical audit matter are (i) the significant judgment exercised by the Company in estimating variable consideration and (ii) the volume and variability of information necessary to evaluate of the initial amounts recorded that are subject to the Company’s estimate of variable consideration.

Our audit procedures related to the variable consideration constraint included the following, among others:


ASSETS		2021			2020				2022			2021
Current assets:
Cash and cash equivalents		$	24,382		$	40,500			$	23,595		$	24,382
Accounts receivable			6,518			7,991				5,867			6,518
Related party receivables			1,665			1,059				2,445			1,665
Investments, at fair value (cost $45,326 and $30,279, respectively)			24,044			8,705
Investments, at fair value (cost $68,766 and $45,326, respectively)										48,042			24,044
Inventories			1,066			1,470				898			1,066
Prepaid and other current assets			3,791			689				1,050			3,791
Assets of consolidated funds:
Investments, at fair value (cost $26,814)			26,490			-
Investments, at fair value (cost $2,432 and $26,814, respectively)										1,797			26,490
Prepaid expenses			578			-				746			578
Current assets of discontinued operations			-			914
Total current assets			88,534			61,328				84,440			88,534
Property and equipment, net			981			1,410				538			981
Equipment held for rental, net			7,391			7,483				7,504			7,391
Identifiable intangible assets, net			8,928			10,258				19,171			8,928
Goodwill			50,536			50,010				52,463			50,536
Right of use assets			5,241			5,392				3,722			5,241
Other assets			258			248				249			258
Noncurrent assets of discontinued operations			-			59,316
Total assets		$	161,869		$	195,445			$	168,087		$	161,869
LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY	LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY							LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	5,521		$	5,007			$	6,038		$	5,521
Accrued expenses and other liabilities			6,955			3,062				7,389			6,955
Deferred revenue			4,438			5,652				1,218			4,438
Current portion of related party payables										486			-
Current portion of lease liabilities			1,920			1,617				1,559			1,920
Current portion of long term debt			-			3,895
Current portion of related party notes payable			-			5,207
Current portion of equipment financing debt			1,974			2,034				2,993			1,974
Liabilities of consolidated funds - accrued expenses and other			12,197			-				11			12,197
Current liabilities of discontinued operations			-			2,829
Total current liabilities			33,005			29,303				19,694			33,005
Lease liabilities, net of current portion			3,596			4,060				2,375			3,596
Long term debt (face value $26,945 and $0, respectively)										25,532			-
Related party payables										1,120			-
Related party notes payable, net of current portion			-			22,696				6,270			-
Convertible Notes (face value $34,346 and $30,521, respectively, including $16,231 and $13,277, respectively, held by related parties)			22,054			17,444
Convertible Notes (face value $36,085 and $34,346, respectively, including $15,133 and $16,231, respectively, held by related parties)										35,187			33,333
Equipment financing debt, net of current portion			67			196				-			67
Redeemable preferred stock of subsidiaries (held by related parties, face value $37,018)			35,529			-
Redeemable preferred stock of subsidiaries (held by related parties, face value $35,824 and $37,018, respectively)										34,747			35,529
Other liabilities			1,070			395				908			915
Noncurrent liabilities of discontinued operations			-			52,781
Total liabilities			95,321			126,875				125,833			106,445
Commitments and Contingencies (Note 20)
Contingently redeemable non-controlling interest			2,639			3,890				2,225			2,639
Stockholders' equity
Preferred stock, $0.001 par value; 5,000,000 authorized and 0 outstanding			-			-
Common stock, $0.001 par value; 350,000,000 shares authorized and 26,613,913 shares issued and 25,948,100 outstanding at June 30, 2021; and 26,217,380 shares issued and 25,529,534 outstanding at June 30, 2020			26			26
Preferred stock, $0.001 par value; 5,000,000 authorized and zero outstanding										-			-
Common stock, $0.001 par value; 350,000,000 shares authorized and 28,932,444 shares issued and 28,507,490 outstanding at June 30, 2022; and 26,613,913 shares issued and 25,948,100 outstanding at June 30, 2021										29			26
Additional paid-in-capital			3,319,767			3,318,117				3,312,763			3,307,613
Accumulated deficit			(3,265,433	)		(3,257,349	)			(3,279,296	)		(3,264,403	)
Total Great Elm Group, Inc. stockholders' equity			54,360			60,794				33,496			43,236
Non-controlling interests			9,549			3,886				6,533			9,549
Total stockholders' equity			63,909			64,680				40,029			52,785
Total liabilities, non-controlling interest and stockholders' equity		$	161,869		$	195,445			$	168,087		$	161,869

The accompanying notes are an integral part of these consolidated financial statements.


	For the years ended June 30,						For the years ended June 30,
	2021			2020			2022			2021
Revenues:
Durable medical equipment sales and services revenue	$	37,460		$	34,213		$	41,720		$	37,460
Durable medical equipment rental income		20,183			21,449			21,738			20,183
Investment management revenues		3,210			3,332			4,516			3,210
Total revenues		60,853			58,994			67,974			60,853

Operating costs and expenses:
Cost of durable medical equipment sold and services		16,881			15,055			16,795			16,881
Cost of durable medical equipment rentals⁽¹⁾		6,950			9,105			7,149			6,950
Durable medical equipment other operating expenses⁽²⁾		28,917			25,921			33,143			28,917
Investment management expenses		3,492			2,104			6,616			3,492
Depreciation and amortization		2,383			2,515			2,261			2,383
Selling, general and administrative⁽³⁾		5,892			6,465			5,982			5,892
Expenses of consolidated funds		75			-			135			75
Total operating costs and expenses		64,590			61,165			72,081			64,590
Operating loss		(3,737	)		(2,171	)		(4,107	)		(3,737	)
Dividends and interest income		2,963			2,124			3,161			2,963
Net realized/ unrealized gain (loss) on investments		155			(8,684	)
Net realized/ unrealized gain on investments of consolidated funds		545			-
Net realized and unrealized gain (loss) on investments								(7,571	)		155
Net realized and unrealized gain (loss) on investments of consolidated funds								(525	)		545
Interest expense		(5,620	)		(4,576	)		(5,786	)		(4,949	)
Extinguishment of debt		(1,866	)		-			(190	)		(1,866	)
Other income, net		45			5			2			45
Loss from continuing operations, before income taxes		(7,515	)		(13,302	)		(15,016	)		(6,844	)
Income tax expense		(1,813	)		(44	)		(21	)		(1,675	)
Loss from continuing operations		(9,328	)		(13,346	)		(15,037	)		(8,519	)
Discontinued operations:
Income from discontinued operations, net of tax		649			219			-			649
Net loss	$	(8,679	)	$	(13,127	)	$	(15,037	)	$	(7,870	)
Less: net loss attributable to non-controlling interest, continuing operations		(648	)		(200	)		(144	)		(648	)
Less: net income attributable to non-controlling interest, discontinued operations		53			48			-			53
Net loss attributable to Great Elm Group	$	(8,084	)	$	(12,975	)
Net loss attributable to Great Elm Group, Inc.							$	(14,893	)	$	(7,275	)
Basic income (loss) per share
Continuing operations	$	(0.34	)	$	(0.52	)	$	(0.56	)	$	(0.31	)
Discontinued operations		0.03			0.01			-			0.03
Net loss	$	(0.31	)	$	(0.51	)
Net loss per share							$	(0.56	)	$	(0.28	)
Diluted income (loss) per share from:
Continuing operations	$	(0.34	)	$	(0.52	)	$	(0.56	)	$	(0.31	)
Discontinued operations		0.03			0.01			-			0.03
Net loss	$	(0.31	)	$	(0.51	)
Net loss per share							$	(0.56	)	$	(0.28	)
Weighted average shares outstanding
Basic		25,722			25,418			26,784			25,722
Diluted		25,722			25,418			26,784			25,722

⁽¹⁾ Includes depreciation expense of:		6,286			8,267			6,527			6,286
⁽²⁾ Net of CARES Act Stimulus of:		4,601			5,069			2,321			4,601
⁽³⁾ Net of CARES Act Stimulus of:		168			-			84			168

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND CONTINGENTLY REDEEMABLE NON-CONTROLLING INTEREST


Dollar and share amounts in thousands	Common Stock				Additional Paid-in			Accumulated			Total Great Elm Group, Inc. Stockholders'			Non- controlling			Total Stockholders'			Contingently Redeemable Non-controlling			Common Stock				Additional Paid-in			Accumulated			Total Great Elm Group, Inc. Stockholders'			Non- controlling			Total Stockholders'			Contingently Redeemable Non-controlling
	Shares		Amount		Capital			Deficit			Equity			Interest			Equity			Interest			Shares		Amount		Capital			Deficit			Equity			Interest			Equity			Interest
BALANCE, June 30, 2019		25,353	$	25	$	3,305,415		$	(3,244,374	)	$	61,066		$	4,016		$	65,082		$	3,912
Net loss		-		-		-			(12,975	)		(12,975	)		(130	)		(13,105	)		(22	)
Issuance of common stock related to vesting of restricted stock		177		1		0			-			1			-			1			-
Issuance of convertible notes		-		-		12,154			-			12,154			-			12,154			-
Stock-based compensation		-		-		548			-			548			-			548			-
BALANCE, June 30, 2020		25,530		26		3,318,117			(3,257,349	)		60,794			3,886			64,680			3,890			25,530	$	26	$	3,305,963		$	(3,257,128	)	$	48,861		$	3,886			52,747		$	3,890
Net loss		-		-		-			(8,084	)		(8,084	)		(332	)		(8,416	)		(263	)		-		-		-			(7,275	)		(7,275	)		(332	)		(7,607	)		(263	)
Issuance of common stock related to vesting of restricted stock		418	0			-			-			-			-			-			-			418		0		-			-			0			-			-			-
Distributions to non-controlling interest holders of DME Inc.		-		-		-			-			-			(988	)		(988	)		(988	)		-		-		-			-			-			(988	)		(988	)		(988	)
Repurchase of interests in subsidiary		-		-		(707	)		-			(707	)		788			81			-			-		-		(707	)		-			(707	)		788			81			-
Issuance of Forest common stock		-		-		-			-			-			2,700			2,700			-			-		-		-			-			-			2,700			2,700			-
Deemed capital contribution related to issuance of convertible notes		-		-		602			-			602			-			602			-			-		-		602			-			602			-			602			-
Issuance of interests in Consolidated Fund		-		-		-			-			-			4,325			4,325			-			-		-		-			-			-			4,325			4,325			-
Sale of real estate business		-		-		-			-			-			(830	)		(830	)					-		-		-			-			-			(830	)		(830	)		-
Stock-based compensation		-		-		1,755			-			1,755			-			1,755			-			-		-		1,755			-			1,755			-			1,755			-
BALANCE, June 30, 2021		25,948	$	26	$	3,319,767		$	(3,265,433	)	$	54,360		$	9,549		$	63,909		$	2,639			25,948		26		3,307,613			(3,264,403	)		43,236			9,549			52,785			2,639
Net loss																								-		-		-			(14,893	)		(14,893	)		270			(14,623	)		(414	)
Issuance of common stock related to vesting of restricted stock																								1,189		1		-			-			1			-			1			-
Repurchase of interests in subsidiary																								-		-		(129	)		-			(129	)		86			(43	)		-
Issuance of common stock related to asset purchase																								1,370		2		2,477			-			2,479			-			2,479			-
Issuance of interests in Consolidated Fund																								-		-		-			-			-			527			527			-
Distribution of interests in Consolidated Fund																								-		-		-			-			-			(3,899	)		(3,899	)		-
Stock-based compensation																								-		-		2,802			-			2,802			-			2,802			-
BALANCE, June 30, 2022																								28,507	$	29	$	3,312,763		$	(3,279,296	)	$	33,496		$	6,533			40,029		$	2,225

The accompanying notes are an integral part of these consolidated financial statements.


	For the years ended June 30,						For the years ended June 30,
	2021			2020			2022			2021
Cash flows from operating activities:
Net loss	$	(8,679	)	$	(13,127	)	$	(15,037	)	$	(7,870	)
Net income from discontinued operations		(649	)		(219	)		-			(649	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		8,669			10,782			8,788			8,669
Stock-based compensation		1,755			548			2,802			1,755
Sales of investments by consolidated funds		5,842			-			41,692			5,842
Purchases of investments by consolidated funds		(31,365	)		-			(18,518	)		(31,365	)
Stock dividends received from GECC		(1,868	)		(279	)
Unrealized (gain) loss on investments		(292	)		8,684
Stock dividends received								(350	)		(1,868	)
Unrealized gain on investments								(623	)		(292	)
Realized loss on investments		137			-			8,194			137
Unrealized (gain) on investments of consolidated funds		(254	)		-
Realized (gain) on investments of consolidated funds		(291	)		-
Unrealized loss (gain) on investments of consolidated funds								311			(254	)
Realized loss (gain) on investments of consolidated funds								214			(291	)
Non-cash interest and amortization of capitalized issuance costs		2,522			881			2,117			1,851
Loss on extinguishment of debt		1,866			-			190			1,866
Deferred tax expense		684			36
Deferred tax (benefit) expense								(85	)		546
Other non-cash expense, net		1,553			1,453			2,132			1,553
Gain on sale of equipment held for rental		(452	)		(932	)		(331	)		(452	)
Change in fair value of contingent consideration		(126	)		(1,135	)		(121	)		(126	)
Changes in operating assets and liabilities:
Related party receivable		(606	)		362			(876	)		(606	)
Accounts receivable		2,099			841			651			2,099
Inventories		617			(134	)		298			617
Prepaid assets, deposits, and other assets		(3,223	)		(190	)		3,158			(3,223	)
Operating leases		(1,563	)		(1,462	)		(2,195	)		(1,563	)
Deferred revenues								(3,220	)		(1,214	)
Related party payable		-			(805	)		486			-
Deferred revenues		(1,214	)		4,773
Accounts payable, accrued liabilities and other liabilities		3,931			1,022			(397	)		3,931
Net cash provided by (used in) operating activities - continuing operations		(20,907	)		11,099			29,280			(20,907	)
Net cash provided by operating activities - discontinued operations		1,931			2,146			-			1,931
Net cash provided by (used in) operating activities		(18,976	)		13,245			29,280			(18,976	)
Cash flows from investing activities:
Proceeds from settlement with seller		-			355
Acquisition of business, net of cash acquired		(748	)		-
Acquisition of businesses, net of cash acquired								(1,350	)		(748	)
Acquisition of assets								(824	)		-
Purchases of investments		(4,675	)		-			(20,468	)		(4,675	)
Sales of investments		35			-			5,499			35
Participation in related party rights offering		(8,751	)		-			(17,500	)		(8,751	)
Purchases of equipment held for rental		(6,686	)		(8,110	)		(6,404	)		(6,686	)
Proceeds from sale of equipment held for rental		1,273			1,800			1,147			1,273
Purchases of property and equipment		(287	)		(737	)		(147	)		(287	)
Proceeds from sale of property and equipment		-			60
Net cash used in investing activities - continuing operations		(19,839	)		(6,632	)		(40,047	)		(19,839	)
Net cash provided by investing activities - discontinued operations		4,357			-			-			4,357
Net cash used in investing activities		(15,482	)		(6,632	)		(40,047	)		(15,482	)


	For the years ended June 30,						For the years ended June 30,
	2021			2020			2022			2021
Cash flows from financing activities:
Proceeds on revolving line of credit		-			2,550
Proceeds of issuance of baby bond								26,945			-
Principal payments on revolving line of credit		(3,900	)		(6,050	)		-			(3,900	)
Principal payments on note payable to seller		(25,105	)		(2,552	)		-			(25,105	)
Principal payments on equipment financing		(4,378	)		(2,857	)		(5,421	)		(4,378	)
Proceeds from equipment financing		3,642			3,612			6,373			3,642
Redemption of redeemable preferred stock of subsidiary								(1,194	)		-
Capitalized issuance costs		(1,250	)		(768	)		(1,429	)		(1,250	)
Due to broker of consolidated funds		11,249			-			(11,379	)		11,249
Payments made to non-controlling interest holders		(132	)		-
Proceeds from convertible notes		-			30,000
Repurchase of interests in subsidiary								(43	)		(132	)
Payments of debt extinguishment costs		(1,627	)		-			-			(1,627	)
Dividends paid to non-controlling interest holders of DME Inc.		(368	)		-			-			(368	)
Issuance of Forest preferred stock		35,010			-			-			35,010
Proceeds from subscriptions of non-controlling interests in consolidated funds		4,825			-
Capital contributions from non-controlling interests in consolidated funds								27			4,825
Distributions to non-controlling interests in consolidated funds								(3,899	)		-
Proceeds from issuance of Forest common stock, gross		2,700			-			-			2,700
Net cash provided by financing activities - continuing operations		20,666			23,935			9,980			20,666
Net cash used in financing activities - discontinued operations		(2,326	)		(2,159	)		-			(2,326	)
Net cash provided by financing activities		18,340			21,776			9,980			18,340
Net increase (decrease) in cash and cash equivalents		(16,118	)		28,389
Net decrease in cash and cash equivalents								(787	)		(16,118	)
Cash and cash equivalents at beginning of year		40,500			12,111			24,382			40,500
Cash and cash equivalents at end of year	$	24,382		$	40,500		$	23,595		$	24,382

Cash paid for interest	$	2,815		$	3,540		$	3,666		$	2,815

Non-cash investing and financing activities
Deferred financing costs incurred but not yet paid	$	-		$	397
Non-cash consideration transferred and debt issued in asset acquisition							$	10,000		$	-
Lease liabilities and right of use assets arising from operating leases		1,121			607			543			1,121
Contingent consideration		397			-			1,617			397
Distribution of HC LLC (as defined below) preferred stock to non-controlling interest holders of DME Inc.		1,608			-			-			1,608
Repurchase of GP Corp. Note		3,072			-			-			3,072
Issuance of convertible notes		2,250			-			-			2,250

The accompanying notes are an integral part of these consolidated financial statements.

Great Elm Group, Inc. (referred to as the Company) is a holding company incorporated in Delaware. The Company currently has 2two business operating segments: durable medical equipment and investment management, with general corporate representing unallocated costs and activity to arrive at consolidated operations. The Company is pursuing business development opportunities in durable medical equipment, investment management and other industries.

On September 27, 2016, the Company’s wholly-owned SEC-registered investment advisor subsidiary Great Elm Capital Management, Inc. (GECM), a Delaware corporation, entered into an investment management agreement (the IMA) with Great Elm Capital Corp., a publicly-traded business development company incorporated in Maryland (GECC).

On ~~November 3, 2016, Full Circle~~May 4, 2022, GECM acquired the investment management agreement of Monomoy Properties REIT, LLC (Monomoy REIT) from Imperial Capital ~~Corporation merged with and into GECC and GECM hired the employees of MAST Capital~~Asset Management, LLC (~~MAST Capital~~ICAM),. Formed in 2014, Monomoy REIT is a ~~Delaware limited liability company, to manage~~private real estate investment trust founded by ICAM, with a 108-property portfolio of diversified net leased industrial assets.

The Company earns revenue through the ~~assets~~investment management agreements of ~~GECC. Through the Company’s majority-owned subsidiary, GECC GP Corp. (GP Corp.~~), the Company acquired assets and assumed related liabilities associated with the on-going operations of GECM. A portion of the non-controlling interest of GP Corp. was owned by MAST Capital, and its affiliates and officers. In March 2021, the Company purchased all interests in GP Corp. held by MAST Capital and its affiliates.

On June 29, 2021, GP Corp assigned the rights to the Profit Sharing Agreement (as defined in Note 7 – Related Party Transactions) with GECM, their intercompany obligation under the GP Corp. Note (as defined in Note 13 – Borrowings)these and other ~~assets~~private investment vehicles which provide for management fees, property management fees, incentive fees and ~~liabilities to their wholly-owned subsidiary Great Elm Capital GP, LLC (GEC GP~~administrative fees.). Subsequent to the assignment, the Company exchanged their 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 taxable reorganization, the Company no longer has an interest in GP Corp.

On September 7, 2018, the Company, through its majority-owned subsidiary, Great Elm DME Holdings, Inc. (DME Holdings), acquired an ~~80.1%~~80.1% equity interest in Great Elm DME, Inc. (DME Inc.) an entity formed to acquire and combine two companies, Valley Healthcare Holding, LLC and Northwest Medical, LLC. (Northwest), which both specialize in the distribution of respiratory care equipment, including primarily positive air pressure equipment and supplies, ventilators and oxygen equipment and operate in Arizona, Nebraska Oregon, Washington and Alaska. The Company has subsequently expanded its durable medical equipment business through acquisitions in 2019 and 2021.

On May 31, 2021, our wholly-owned subsidiary DME Holdings exchanged their ~~80.1%~~80.1% interests in DME Inc. for an identical ~~80.1%~~80.1% direct interest in DME Inc.’s subsidiary Great Elm Healthcare, LLC (HC LLC), which is the sole owner of the durable medical equipment operating subsidiaries. Following the consummation of the taxable reorganization, the Company no longer has an interest in DME Inc.

On December 29, 2020, the Company completed a non-taxable reorganization of the Company's corporate structure, where Great Elm Capital Group, Inc. (GEC) changed its name to Forest Investments, Inc. (Forest) and became a wholly owned subsidiary of a new holding company, Great Elm Group, Inc (GEG). Outstanding shares of Forest under the ticker symbol “GEC” were automatically converted into shares of common stock of Great Elm Group, Inc., ticker symbol “GEG”. Forest 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 (as defined in Note 4 – Holding Company Reorganization and Financing Transaction) was a tax-free transaction for U.S. federal income tax purposes for the Company’s shareholders.

We launched our real estate business in March 2018 with an investment of ~~$2.7~~$2.7 million in a majority-interest in 2two 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. On June 23, 2021, the Company sold its real estate business for ~~$4.6~~$4.6 million in cash.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. Wholly-owned subsidiaries include GECM, Great Elm Opportunities GP, Inc. (GEO GP), Great Elm Capital GP, LLC (GEC GP), Great Elm FM Acquisition, Inc. (FM Acquisition), DME Holdings and Great Elm DME Manager, LLC (DME Manager). Majority-owned subsidiaries ~~(including those divested during the year)~~ include Forest, ~~GEC GP, GP Corp., Great Elm FM Holdings, Inc. (FM Holdings), CRIC IT Fort Myers, LLC, DME Inc. and~~ HC LLC and its seven wholly-owned subsidiaries. In addition, we have determined that the Company is the primary beneficiary of certain variable interest entities, and therefore the operations of those entities have been included in our consolidated results for the relevant periods.

Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP) requires the Company to make estimates and assumptions that affect the reported amounts in the financial statements and disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates all of these estimates and assumptions. The most important of these estimates and assumptions relate to revenue recognition, the valuation of excess and obsolete inventories, depreciable lives of equipment, impairment of long lived tangible and intangible assets, valuation allowance for deferred tax assets, fair value measurements including stock-based compensation and contingent consideration, estimates associated with the application of acquisition accounting, and the value of lease liabilities and corresponding right to use assets. Although these and other estimates and assumptions are based on the best available information, actual results could be different from these estimates.

Assets and liabilities related to the real estate business operating segment on the Company’s consolidated balance sheet as of June 30, 2020 have been reclassified as assets and liabilities of discontinued operations. All assets and liabilities related to discontinued operations are excluded from the notes unless otherwise noted. In addition, the historical results of the real estate business operating segment have been reflected in the accompanying consolidated statements of operations for the ~~years~~year ended June 30, 2021 ~~and 2020~~ as discontinued operations. See Note 5 – Discontinued Operations.

~~F-10~~

Principles of Consolidation

The Company consolidates the assets, liabilities, and operating results of its wholly-owned subsidiaries, majority-owned subsidiaries, and subsidiaries in which we hold a controlling financial interest as of the financial statement date. In most cases, a controlling financial interest often reflects ownership of a majority of the voting interests. We consolidate a variable interest entity (VIE) when we possess both the power to direct the activities of the VIE that most significantly impacts its economic performance and we are either obligated to absorb the losses that could potentially be significant to the VIE or we hold the right to receive benefits from the VIE that could potentially be significant to the VIE.

All intercompany accounts and transactions have been eliminated in consolidation.

Non-controlling interests in the Company’s subsidiaries are reported as a component of equity, separate from the parent company’s equity or outside of permanent equity for non-controlling interests that are contingently redeemable. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary. Results of operations attributable to the non-controlling interests are included in the Company’s consolidated statements of operations.

Segments

~~Segments~~

The Company has 2two business operating segments: durable medical equipment and investment management with general corporate representing unallocated costs and activity to arrive at consolidated operations. The Company regularly reviews each segment for purposes of allocating resources and assessing performance.

F-10

Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash equivalents consist primarily of exchange-traded money market funds. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured.

Accounts Receivable

The assessment of variable consideration to be constrained is based on estimates, and ultimate losses may vary from current estimates. As adjustments to these estimates become necessary, they are reported in earnings in the periods in which they become known. There were no material adjustments to revenues made in the year ended June 30, ~~2021~~2022 relating to prior periods. Changes in variable consideration are recorded as a component of net revenues.

~~F-11~~

As of June 30, ~~2021~~2022 the Company had unbilled receivables of approximately ~~$0.3~~$0.4 million that relate to transactions where the Company has the ultimate right to invoice a Payor under the terms of the arrangement, but are not currently billed and are therefore contract assets. Such contract assets are included in accounts receivable in the consolidated balance sheets.

Investments

~~Investments~~

Investments include investments in GECC, Monomoy Properties UpREIT, the operating partnership of Monomoy REIT (Monomoy UpREIT), and other private funds, which are carried at fair value.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under US GAAP. See Note 8 – Fair Value Measurements.

Property, Equipment and Rental Equipment

The Company records property and equipment acquired at cost. The costs of property acquired from asset acquisitions or business combinations is recorded at fair value at the date of acquisition based on its estimated replacement costs.

F-11

Within the durable medical equipment businesses, the Company capitalizes the cost of equipment predominantly leased out to patient customers within equipment held for rental, net. These purchases are classified as cash outflows from investing activities when they are paid. The Company capitalizes the cost of equipment predominantly sold to patient customers within inventories. These purchases are classified as cash outflows from operating activities when they are paid. A portion of equipment recorded within equipment held for rental, net, could ultimately be sold. A portion of equipment recorded within inventories could ultimately be leased. Management is not able to accurately project the ultimate use of equipment, which in many cases is determined by Payor reimbursement terms, and has therefore adopted the above stated policy.

Management has estimated the useful lives of equipment leased to customers where title ultimately transfers to customers (e.g., capped rentals, typically 13 months with title transfer) based upon an analysis of ultimate disposition of rental equipment, some of which is returned to the Company and either re-leased or sold.

The Company recognizes depreciation in amounts sufficient to match the cost of depreciable assets to operations over their estimated service lives, which considers the term of lease for any leased assets. The Company capitalizes expenditures for improvements that significantly extend the useful life of an asset. The Company charges expenditures for maintenance and repairs to operations in the periods incurred. When assets are sold, the asset and accumulated depreciation are eliminated, and a gain or loss is recognized in operating income.

Depreciation is recognized using the straight-line method over their estimated useful lives as follows:


Description		Life in Years
Property and Equipment
Leasehold improvements		lesser of 7 years or life of the lease
~~Vehicles~~		5
~~Sleep study equipment~~	Vehicles		5
~~Furniture and fixtures~~	Sleep study equipment	~~1 to~~	5
Furniture and fixtures		1 to 5
Computer equipment and software			3
Rental Equipment
Medical equipment for lease			1 to 5

Inventories

~~F-12~~

~~Inventories~~

Inventories, which principally consist of durable medical equipment and related supplies that are predominantly sold, are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. The Company reduces the carrying value of inventories for items that are potentially excess, obsolete, or slow-moving based on changes in customer demand, technology developments or other economic factors. The Company bases its provisions for excess, expired and obsolete inventory primarily on purchasing activity and usage. A significant change in the timing or level of demand for our products as compared with forecasted amounts may result in recording additional provisions for excess, expired and obsolete inventory in the future. As the Company purchases all of its inventories, all inventories are categorized as finished goods. There were 0no significant write-offs during the year ended June 30, ~~2021.~~2022.

Goodwill and Other Identifiable Intangible Assets

Goodwill represents the excess of fair value over identifiable tangible and intangible net assets acquired in business combinations. Goodwill is not amortized for US GAAP purposes. 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. We perform our annual impairment test on the first day of the fiscal fourth quarter, or as required when impairment triggering events are identified.

The Company amortizes its identifiable intangible assets over their estimated useful lives using a discounted cash flow attribution or straight-line methods as determined appropriate for each identifiable intangible asset. The Company amortizes its identifiable intangible assets over periods ranging from five to fifteen ~~years.~~years.

F-12

Long-lived Assets

Long-lived assets include property and equipment, intangible assets and the right to use asset. These assets are evaluated for potential impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable based on undiscounted cash flows. If an impairment is indicated, the Company records the impaired asset at fair value and records a charge to operations.

Leases and Right of Use Assets

We determine if an arrangement is a lease at inception. As of June 30, ~~2021,~~2022, all of our leases are operating leases. Operating leases are included in right of use ~~assets~~ (ROU), assets, current portion of lease liabilities and lease liabilities net of current portion in the consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide a readily determinable implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The ROU assets also include any lease payments made and adjustments recorded in acquisition accounting. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, primarily consisting of common area maintenance charges, and have elected the practical expedient to account for lease and non-lease components together as a single lease component.

~~F-13~~

Cost of Durable Medical Equipment Sold and Services

Cost of durable medical equipment sold and services is comprised of costs included in inventory for medical equipment sold and direct costs associated with providing sleep study services, including staff to perform the studies and supplies used in the studies.

Cost of Durable Medical Equipment Rentals

Cost of rentals includes depreciation on medical equipment held for lease and related maintenance expenses.

Durable Medical Equipment Other Operating Expenses

The Company classifies direct expenses of its durable medical equipment segment, including payroll, facilities and equipment costs, professional fees and other administrative costs, in durable medical equipment other operating expenses in the accompanying consolidated statements of operations.

Investment Management Expenses

The Company classifies all direct expenses of its investment management segment including: payroll, stock-compensation, and related taxes and benefits; facilities costs; and consulting; in investment management expenses in the accompanying consolidated statements of operations. The Company had a contractual arrangement through November 2019 with a third party to provide services in exchange for 26% of the fees earned from the management of GECC, excluding incentive fees. This arrangement was not renewed upon expiration.

Depreciation and Amortization

The Company has separately presented depreciation and amortization expense, except for depreciation expense which is included in cost of durable medical equipment rentals as described above. Such depreciation and amortization expense is based on the estimated useful lives of the underlying assets.

F-13

Stock-based Compensation

Stock-based compensation costs for eligible employees and directors are measured at fair value on the date of grant and are expensed over the requisite service period using a straight-line attribution method for the entire award that are subject to only service vesting conditions. Awards with both performance and service requirements are expensed using a graded vesting attribution method over the requisite service periods.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. 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. Valuation allowances are established when necessary, in order to reduce deferred tax assets to the amounts more likely than not to be recovered.

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.

~~F-14~~

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. 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.

Asset Acquisitions and Business Combinations

~~Business~~Asset acquisitions are accounted for using the cost accumulation method while business combinations are accounted for at fair value. ~~Acquisition~~Determining whether the acquired set represents an asset acquisition or a business combination requires quantitative and qualitative assessments that require judgment.

In an asset acquisition, acquisition costs are capitalized as part of the acquired set. The accounting for asset acquisitions requires estimates and judgment to allocate the costs incurred to acquire the assets among the assets acquired using their relative fair value. As such, the values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

F-14

In a business combination, acquisition costs are expensed as incurred and recorded in selling, general and administrative expenses; previously held equity interests are valued at fair value upon the acquisition of a controlling interest; restructuring costs associated with a business combination are expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date affect income tax expense. Measurement period adjustments are made in the period in which the amounts are determined and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. All changes that do not qualify as measurement period adjustments are also included in current period earnings. The accounting for business combinations 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 acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of finite-lived intangible assets, or the recognition of additional consideration which would be expensed. The fair value of contingent consideration is remeasured each period based on relevant information and changes to the fair value are included in the operating results for the period within general and administrative expense.

Net Income (Loss) Per Share

The following table presents the calculation of basic and diluted earnings (loss) per share:


	For the years ended June 30,						For the years ended June 30,
(in thousands except per share amounts)	2021			2020			2022			2021
Loss from continuing operations	$	(9,328	)	$	(13,346	)	$	(15,037	)	$	(8,519	)
Income from discontinued operations, net of tax		649			219			-			649
Net loss	$	(8,679	)	$	(13,127	)	$	(15,037	)	$	(7,870	)
Less: net loss attributable to non-controlling interest, continuing operations		(648	)		(200	)		(144	)		(648	)
Less: net income attributable to non-controlling interest discontinued operations		53			48			-			53
Net loss attributable to Great Elm Group	$	(8,084	)	$	(12,975	)
Net loss attributable to Great Elm Group, Inc.							$	(14,893	)	$	(7,275	)
Weighted average shares basic and diluted:
Weighted average shares of common stock outstanding		25,722			25,418			26,784			25,722
Weighted average shares used in computing income (loss) per share		25,722			25,418			26,784			25,722
Basic and diluted income (loss) per share from:
Loss from continuing operations	$	(0.34	)	$	(0.52	)	$	(0.56	)	$	(0.31	)
Income from discontinued operations		0.03			0.01			-			0.03
Net loss	$	(0.31	)	$	(0.51	)
Net loss per share							$	(0.56	)	$	(0.28	)

~~F-15~~

When calculating earnings per share, we are required to adjust for the dilutive effect of common stock equivalents. As of June 30, ~~2021~~2022 the Company had ~~13,289,022~~13,839,273 potential shares of common stock, including ~~9,891,734~~10,392,545 shares of common stock issuable upon the conversion of the Company’s convertible notes, that are not included in the diluted net income (loss) per share calculation because to do so would be anti-dilutive. As of June 30, ~~2020,~~2021, the Company had ~~12,206,044~~13,289,022 potential shares of common stock, including ~~8,790,049~~9,891,734 shares of common stock issuable upon the conversion of the Company’s convertible notes, that are not included in the diluted net income (loss) per share calculation because to do so would be antidilutive.

As of June 30, ~~2021~~2022 and ~~2020,~~2021, the Company had an aggregate of 1,216,481 and 732,909 issued shares, respectively, that are subject to forfeiture by the employee at a nominal price if service ~~and~~and/or performance milestones are not met. The Company does not account for such shares as being outstanding for accounting purposes since they are unvested and subject to forfeiture.

F-15

Restrictions on Subsidiary Dividends

The ability of HC ~~LLC.~~LLC to pay dividends is subject to compliance with the restricted payment covenants under the DME Revolver.

Concentration of Risk

The Company’s net investment revenue and receivables from continuing operations are primarily attributable to the management of one investment vehicle, GECC. See Note 7 – Related Party Transactions.

The Company’s durable medical equipment revenue and related accounts receivable are concentrated with third-party Payors. The following table summarizes customer concentrations as a percentage of revenues:

For the years ended June 30,

2021

2020⁽¹⁾

Government Payor

37%

33%

Third-party Payor

12%

11%


	For the years ended June 30,
	2022	2021
Government Payor	35%	37%
Third-party Payor	12%	12%

⁽¹⁾

~~Revenue concentration percentages have been recast from those previously reported to reflect the presentation of the real estate business within discontinued operations.~~

The following table summarizes customer concentrations as a percentage of accounts receivable:


	As of June 30,
	2022	2021
Government Payor	29%	30%
Third-party Payor	14%	14%

As of June 30,

2021

2020

Government Payor

30%

23%

Third-party Payor

14%

12%

Recently Adopted Accounting Standards

~~Fair Value Measurements~~Accounting for Convertible Instruments In August ~~2018,~~2020, theFinancial Accounting Standards Board (FASB) issued Accounting Standards ~~Updated~~ Update (ASU) ~~2018-13,~~2020-06~~Fair Value Measurement (Topic 820): Disclosure Framework – Changes~~, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating certain separation models. Under ASU 2020-06, a convertible debt instrument will generally be reported as a single liability at its amortized cost with no separate accounting for embedded conversion features. Consequently, the interest rate of convertible debt instruments will be closer to the ~~Disclosure Requirements~~coupon interest rate. In addition, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for ~~Fair Value Measurement, resulting~~convertible instruments and requires the use of the if-converted method. The guidance in ~~various disclosures related to fair value measurements being eliminated, modified or supplemented.~~this ASU ~~2018-13~~ is effective for fiscal years beginning after December 31, 2023, including interim ~~and annual~~ periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, ~~2019,~~2020, including interim periods within those fiscal years. The Company adopted this ASU on July 1, 2021 under the full retrospective method. When our Convertible Notes were originally issued on February 29, 2020, we recorded a $12.6 million discount to additional paid-in capital and against the Convertible Notes due to the existence of a cash conversion feature. Upon adoption we reversed this entry to additional-paid in capital and the Convertible Notes in all periods presented, and reversed any life-to-date interest expense and deferred tax expense associated with the amortization of the discount as an ~~option~~adjustment to ~~early adopt any eliminated or modified disclosures, and to delay~~beginning retained earnings of the prior year. As a result of the application of the retrospective adoption of ~~the additional disclosures, until the effective date.~~ASU 2020-06, certain line items in our consolidated financial statements and related notes were adjusted as follows:


	As of June 30, 2021
Consolidated Balance Sheet Impact	As Reported(1)			ASU 2020-06 Adjustment			As Adjusted(1)
Liabilities
Convertible notes	$	22,054		$	11,279		$	33,333
Other liabilities		1,070			(155	)		915
Total Liabilities		95,321			11,124			106,445
Stockholders' equity
Additional paid-in-capital		3,319,767			(12,154	)		3,307,613
Accumulated deficit		(3,265,433	)		1,030			(3,264,403	)
Total Great Elm Group, Inc Stockholder's Equity		54,360			(11,124	)		43,236
Total Stockholder's Equity		63,909			(11,124	)		52,785

F-16


	For the year ended June 30, 2021
Consolidated Statement of Operations Impact	As Reported(1)			ASU 2020-06 Adjustment		As Adjusted(1)
Non-operating expenses
Interest expense	$	(5,620	)	$	671	$	(4,949	)
Net loss from continuing operations
Loss from continuing operations, before income taxes		(7,515	)		671		(6,844	)
Income tax expense		(1,813	)		138		(1,675	)
Loss from continuing operations		(9,328	)		809		(8,519	)
Discontinued operations:
Income from discontinued operations, net of tax		649					649
Net loss		(8,679	)		809		(7,870	)
Less: net loss attributable to non-controlling interest, continuing operations		(648	)				(648	)
Less: net income attributable to non-controlling interest, discontinued operations		53					53
Net loss attributable to Great Elm Group		(8,084	)		809		(7,275	)
Net loss per share (basic and diluted)		(0.31	)		0.03		(0.28	)


	For the year ended June 30, 2021
Consolidated Statements of Stockholders' Equity Impact	As Reported(1)			ASU 2020-06 Adjustment			As Adjusted(1)
Net loss		(8,084	)		809			(7,275	)
Accumulated Deficit		(3,265,433	)		1,030			(3,264,403	)
Total Great Elm Group, Inc. Stockholder's Equity		54,360			(11,124	)		43,236
Total Stockholder's Equity		63,909			(11,124	)		52,785


	For the year ended June 30, 2021
Consolidated Statement of Cash Flows Impact	As Reported(1)			ASU 2020-06 Adjustment			As Adjusted(1)
Net loss		(8,679	)		809			(7,870	)
Non-cash interest and amortization of capitalized issuance costs		2,522			(671	)		1,851
Deferred tax expense		684			(138	)		546
Net cash provided by (used in) operating activities - continuing operations		(20,907	)		-			(20,907	)
Net cash provided by operating activities - discontinued operations		1,931			-			1,931
Net cash provided by (used in) operating activities		(18,976	)		-			(18,976	)

Net cash used in investing activities - continuing operations		(19,839	)		-			(19,839	)
Net cash provided by investing activities - discontinued operations		4,357			-			4,357
Net cash used in investing activities		(15,482	)		-			(15,482	)

Net cash provided by financing activities - continuing operations		20,666			-			20,666
Net cash used in financing activities - discontinued operations		(2,326	)		-			(2,326	)
Net cash provided by financing activities		18,340			-			18,340
Net increase (decrease) in cash and cash equivalents		(16,118	)		-			(16,118	)
Cash and cash equivalents at beginning of year		40,500			-			40,500
Cash and cash equivalents at end of year		24,382			-			24,382

F-17

(1) The ~~Company early adopted the eliminated and modified disclosures of ASU 2018-13 during the three months ended~~As Reported column refects amounts originally reported in our Form 10-K filed on September ~~30, 2018 and adopted the supplemental disclosures related to level 3 fair value measurements as of July 1, 2020.~~21, 2021. The As Adjusted column reflects recast amounts reported in our Form 8-K filed on May 5, 2022.

~~F-16~~

Recently Issued Accounting Standards

Current Expected Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which changes the impairment model for financial instruments, including trade receivables from an incurred loss method to a new forward looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical experience, current information and reasonable and supportable forecasts. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the potential impact that the adoption of this ASU will have on its consolidated financial statements.

Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): facilitation of the Effects of Reference Rate Reform on Financial Reporting, in response to the United Kingdom Financial Conduct Authority which announced the desire to phase out the use of London Interbank Offered Rate (~~(LIBOR)~~LIBOR) by the end of 2021. The provisions provide optional expedients and exceptions for applying US GAAP to contracts, hedging relationships and other transactions affected by reference rate reform on financial reporting due to the cessation of LIBOR if certain criteria are met. If LIBOR ceases to exist, we may need to renegotiate outstanding notes payable outstanding which extend beyond 2021 with the respective counterparties. Adoption of the provisions in ASU 2020-04 are optional and effective from March 12, 2020 through December 31, 2022. The Company is considering the optionality of ASU 2020-04 and is evaluating the potential impact that the adoption of this ASU will have on its consolidated financial statements.

~~Accounting for Convertible Instruments~~

~~In August 2020, the~~ 3.~~FASB~~ ~~issued~~ ~~ASU 2020-06~~, ~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~, which simplifies the accounting for convertible instruments by eliminating certain separation models. Under ASU 2020-06, a convertible debt instrument will generally be reported as a single liability at its amortized cost with no separate accounting for embedded conversion features. Consequently, the interest rate of convertible debt instruments will be closer to the coupon interest rate. In addition, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The guidance in this ASU are effective for fiscal years beginning after December 31, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company determined to adopt this ASU on July 1, 2021 under the full retrospective method. When our Convertible Notes were originally issued on February 29, 2020, we recorded a $12.6 million discount to additional paid-in capital and against the Convertible Notes due to the existence of a cash conversion feature. As such, upon adoption we will reverse this entry to additional-paid in capital and the Convertible Notes in all periods presented, and will reverse any life-to-date interest expense associated with the amortization of the discount as an adjustment to beginning retained earnings of the prior year. Had this ASU been adopted in the current year, our interest expense and net losses for the years ended June 30, 2021 and 2020 would have been lower by $0.7 million and $0.2 million, respectively.

~~F-17~~

Revenue

~~Revenue~~

The revenues from each major source of revenue are summarized in the following table:


	For the years ended June 30,				For the years ended June 30,
(in thousands)	2021		2020		2022		2021
Product and Services Revenue
Investment Management
Management Fees	$	2,652	$	2,793	$	3,612	$	2,652
Property Management Fees						171		-
Administration Fees		558		539		733		558
		3,210		3,332		4,516		3,210
Durable Medical Equipment
Equipment Sales		32,293		28,934		36,161		32,293
Service Revenues		5,167		5,279		5,559		5,167
		37,460		34,213		41,720		37,460

Total product and services revenue	$	40,670	$	37,545	$	46,236	$	40,670

Rental Revenues
Durable Medical Equipment
Medical Equipment Rental Income		20,183		21,449		21,738		20,183
Total rental revenue		20,183		21,449		21,738		20,183

Total	$	60,853	$	58,994	$	67,974	$	60,853

F-18

Revenue Accounting Under Topic 606

In determining the appropriate amount of revenue to be recognized under FASB Accounting Standards Codification Topic 606, Revenues, (Topic 606), the Company performed the following steps: (i) identified the promised goods or services in the contract; (ii) determined whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measured the transaction price, including the constraint on variable consideration; (iv) allocated the transaction price to the performance obligations; and (v) recognized revenue when (or as) the Company satisfies each performance obligation.

Durable Medical Equipment Revenue

Equipment Sales and Services Revenues

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. 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.

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.

~~F-18~~

The transaction price on both equipment sales and sleep studies is the amount that the Company expects to receive in exchange for the goods and services provided. 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. As such, we constrain the transaction price for the difference between the amounts billed and what we believe we will collect from Payors and from patients. The transaction price therefore is predominantly based on contractual payment rates determined by the Payors. The Company does not generally contract with uninsured customers. We determine our estimates of billing adjustments based upon contractual agreements, our policies and historical experience. While the rates are fixed for the product or service with the customer and the Payors, such amounts typically include co-payments, co-insurance and deductibles, which vary in amounts, from the patient customer. The Company includes in the transaction price only the amount that the Company expects to be entitled, which is substantially all of the Payor billings at contractual rates. The transaction price is initially constrained by the amount of customer co-payments we estimate will not be collected.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain Payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial. The Company constrains revenue for these estimated adjustments. During the year ended June 30, ~~2021,~~2022, there were no material changes in estimates relating to prior periods.

The payment terms and conditions of customer contracts vary by customer type and the products and services offered.

F-19

The Company may provide shipping services prior to the point of delivery and has concluded that the services represent a fulfilment activity and not a performance obligation. Returns and refunds are not accepted on either equipment sales or sleep study services. The Company does not offer warranties to customers in excess of the manufacturer’s warranty. Any taxes due upon sale of the products or services are not recognized as revenue. The Company does not incur contract acquisition costs. The Company generally does not have any partially or unfilled performance obligations related to contracts with customers. However, during the quarter ended June 30, 2020, the Company applied for and received ~~$4.4~~$4.4 million in advanced payments from the Centers for Medicare and Medicaid Services (CMS) under their Accelerated and Advance Payment Program, which was expanded to increase cash flow to providers of services and suppliers impacted by the 2019 Novel Coronavirus (COVID-19) pandemic. CMS began recoupments during our fiscal year 2021. We have issued recoupments of ~~$0.9~~$3.2 million and $0.9 million during the ~~year~~years ended June 30, 2022 and 2021, respectively, leaving a remaining balance of ~~$3.5 million.~~$0.3 million as of June 30, 2022. These amounts are included within deferred revenue on the condensed consolidated balance sheet. The Company has 0no other contract liabilities as of June 30, ~~2021~~2022 or ~~2020.~~2021.

Included in sales and services revenue are unbilled amounts for which the revenue recognition criteria had been met as of period-end but were not yet billed to the Payor. The estimate of net unbilled sales and service revenue recognized is based on historical trends and estimates of future collectability. As of June 30, ~~2021~~2022 and ~~2020,~~2021, net unbilled sales and service revenue is approximately ~~$0.2~~$0.3 million and ~~$0.3~~$0.2 million, respectively, and is included in accounts receivable.

Investment Management Revenue

The Company recognizes revenue from its investment management business at amounts that reflect the consideration to which it expects to be entitled in exchange for providing services to its customer. Investment management revenue primarily consists of fees based on a percentage of assets under management, fees based on the performance of managed assets, and administrative fees. Fees are based on agreements with each investment products and may be terminated at any time by either party subject to the specific terms of each respective agreement.

~~F-19~~

Management Fees

The Company earns management fees based on the investment management agreement GECM has with GECC, Monomoy REIT and other private funds managed by GECM (collectively, the ~~Funds~~)Funds). The performance obligation is satisfied over time as the services are rendered, since ~~GECC~~the managed vehicles simultaneously ~~receives~~receive and ~~consumes~~consume the benefits provided as GECM performs services. Management fee rates range from 1%1% to ~~1.50%~~1.50% of the management fee assets specified within each agreement. Based on the terms of the specific agreement, management fees may be calculated and billed in ~~advance or in~~ arrears of the period, ~~no less frequently than~~either monthly or quarterly. Management fee revenue is recognized over time as the services are provided.

Property Management Fees

Under the Monomoy REIT agreement, GECM is also entitled to 4% of rent collected. These fees are collected monthly in arrears. Property management fee revenue is recognized over time as the services are provided.

F-20

Incentive Fees

The Company earns incentive fees based on the investment management agreements GECM has with GECC, Monomoy Properties II, LLC (a feeder fund of the Monomoy REIT) and separately managed accounts. Where an investment management agreement includes both management fees and incentive fees, the performance obligation is considered to be a single obligation for both fees. Incentive fees are variable consideration associated with the ~~GECC~~ investment management ~~agreement.~~agreements. Incentive fees are earned based on investment performance during the period, subject to the achievement of minimum return levels or high-water marks, in accordance with the terms of the respective investment management agreements. Incentive fees range from ~~5.0%~~5.0% to ~~20.0%~~25.0% of the performance-based metric specified within each agreement. Because of the uncertainty of when incentive fees will be collected due to market conditions and investment performance, incentive fees are fully constrained and not recorded until received and the probability of significant reversal of the fees is eliminated in accordance with the respective investment management agreements. Effective March 31, 2022, the Company unconditionally waived all accrued incentive fees for GECC through March 31, 2022. As of June 30, ~~2021,~~2022, there ~~is $9.7 million in~~are no incentive fees which have been earned per the terms of the investment management ~~agreements but not recorded as they are still subject to the constraints described above.~~agreements.

Administration Fees

The Company earns administration fees based on the administration agreement GECM has with GECC and Monomoy REIT whereby ~~GECC reimburses~~the vehicles reimburse GECM for costs incurred in performing administrative ~~functions~~functions. This revenue is recognized over time as the services are performed. Administrative fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflect agreed upon rates for the services provided. The services are accounted for as a single performance obligation for each vehicle that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

The Company also earns service fees based on a shared services agreement with certain portfolio companies of GECC. This revenue is recognized over time as the services are performed. ~~Administrative~~Service fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflect agreed upon rates for the services provided. The services are accounted for as a single performance obligation that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

Revenue Accounting Under Topic 842

Durable Medical Equipment Revenue

Equipment Rental Revenue

Under FASB Accounting Standards Codification Topic 842, Leases, (Topic 842) rental income from operating leases is recognized on a straight-line basis, based on contractual lease terms with fixed and determinable increases over the non-cancellable term of the related lease when collectability is reasonably assured. The Company leases durable medical equipment to customers for a fixed monthly amount on a month-to-month basis. The contractual length of the lease term varies based on the type of equipment that is rented to the customer, but generally is from 10 to ~~36-months.~~36-months. In the case of capped rental agreements, title to the equipment transfers to the customer at the end of the contractual rental period. The customer has the right to cancel the lease at any time during the rental period for a subsequent month’s rental and payments are generally billed in advance on a month-to-month basis. Under Topic 842, rental income from operating leases is recognized on a month-to-month basis, based on contractual lease terms when collectability is reasonably assured. Certain customer co-payments are included in revenue to the extent they are considered probable of payment.

~~F-20~~

The lease term begins on the date products are delivered to patients and are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare, private payors, and Medicaid. Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain Payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial. There were no material changes in estimates recorded in the year ended June 30, ~~2021,~~2022, relating to prior periods.

F-21

Although invoicing typically occurs at the beginning of the monthly rental period, we recognize revenue from rentals on a daily basis. Since rental agreements can commence at any time during a given month, we defer revenue related to the remaining monthly rental period as of period end. Deferred revenue related to rentals was ~~$1.0~~$0.9 million and ~~$1.3~~$1.0 million as of June 30, 2022 and 2021, ~~and 2020,~~ respectively.

Included in rental revenue are unbilled amounts for which the revenue recognition criteria had been met as of period-end but were not yet billed to the Payor. Net unbilled rental revenue is recognized to the extent payment is probable. As of June 30, ~~2021~~2022 and ~~2020,~~2021, net unbilled rental revenue is approximately ~~$0.1~~$0.1 million and ~~$0.2~~$0.1 million, respectively, and is included in accounts receivable.

On December 21, 2020, GEC announced plans to create a new public holding company, Great Elm Group, Inc. (the Company) 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.

On December 29, 2020, pursuant to the terms of the Agreement and Plan of Merger, dated as of December 21, 2020, among Forest (formerly GEC), the Company and Forest Merger Sub, Inc., a newly created entity for the purpose of facilitating the Merger, (as it may be amended from time to time, the Merger Agreement), the transactions contemplated by the Merger Agreement (the Transactions) were consummated. As a result of the Transactions, and subject to the same terms and conditions as applied immediately prior to the Transactions, each share of Forest's outstanding common stock, common stock options, restricted stock units and restricted shares were exchanged for identical instruments of the ~~Company.~~Company.

Following the consummation of the Holding Company Reorganization, J.P. 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~~$37.7 million.

(each collectively noted above, the JPM Transactions). See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary.

Using proceeds from the JPM Transactions, DME Inc. paid off the term loan with Corbel (the Corbel Facility). See Note 13 – Borrowings.

On May 31, 2021, our wholly-owned subsidiary DME Holdings exchanged their ~~80.1%~~80.1% interests in DME Inc. for an identical ~~80.1%~~80.1% direct interest in DME Inc.’s subsidiary HC LLC, which is the sole owner of the durable medical equipment operating subsidiaries. Following the consummation of the taxable reorganization, the Company no longer has an interest in DME Inc.

On June 29, 2021, GP Corp assigned the rights to the Profit Sharing Agreement with GECM, their intercompany obligation under the GP Corp. Note and other assets and liabilities to their wholly-owned subsidiary GEC GP. Subsequent to the assignment, Great Elm Group, Inc. exchanged their ~~98.2%~~98.2% interests in GP Corp. for an identical ~~98.2%~~98.2% direct interest in GP Corp.’s wholly-owned subsidiary GEC GP. Following the consummation of the taxable reorganization, the Company no longer has an interest in GP Corp. During the year ended June 30, 2022, the Company purchased the remaining non-controlling interests in GEC GP. As of June 30, 2022, no non-controlling interest remains outstanding. See Note 16 - Non-Controlling Interests and Preferred Stock of Subsidiary.

On June 23, 2021, the Company’s majority-owned indirect subsidiary FM Acquisition, entered into an agreement with Monomoy Properties Fort Myers, LLC (Monomoy FM) to sell the Company’s real estate business to Monomoy FM for ~~$4.6~~$4.6 million in cash. The real estate business consists of majority-interests in 2two Class A office buildings totaling 257,000 square feet situated on 17 acres of land in Fort Myers, Florida. The Company acquired the real estate business in March 2018 for ~~$2.7~~$2.7 million. After transaction costs, the gain on the sale was ~~$0.3~~$0.3 million.

Pursuant to the terms of the Purchase Agreement, the proceeds of the sale were subsequently reinvested in newly issued membership interests of Monomoy Properties, LLC (Monomoy Fund), a privately-held fund comprised of a portfolio of net leased industrial real estate assets.

The sale of the real estate business, which has historically been disclosed as its own reportable segment, represents a strategic shift away from the direct ownership and operation of real estate properties. Accordingly, our historical financial information has been recast to present the activities of the real estate business within discontinued operations, and the assets and liabilities of the real estate business as assets and liabilities of discontinued operations. As a passive investor in Monomoy Fund and with a membership interest of approximately 5%5%, we ~~have~~ determined that we ~~have~~had no significant continuing involvement with the real estate ~~business.~~business upon disposition.

~~F-22~~

The following table provides a reconciliation of the Company’s net income from discontinued operations presented in the consolidated statements of ~~operations:~~operations for the year ended June 30, 2021:


(in thousands)	For the year ended June 30, 2021
Discontinued operations:
Net revenue	$	5,005
Real estate expenses		(505	)
Depreciation and amortization		(1,689	)
Operating income from discontinued operations		2,811
Interest expense		(2,536	)
Gain on sale of real estate business		263
Pretax income from discontinued operations		538
Income tax benefit		111
Net income from discontinued operations	$	649

There was no activity from discontinued operations in the consolidated statement of operations for the year ended June 30, 2022.

Related party transactions are measured in part by the amount of consideration paid or received as established and agreed by the parties. Consideration paid for such services in each case is the negotiated value.

The Company’s wholly-owned subsidiary, GECM, has agreements to provide administrative services and manage the investment portfolio for GECC, Monomoy REIT and other investment products. Under these agreements, GECM receives administrative fees, management fees based on the managed assets (other than cash and cash equivalents) and rent collected, and incentive fees based on the performance of those assets. See Note 3 – Revenue for additional discussions of the fee arrangements.

The Company’s wholly-owned subsidiary, GEO GP serves as the general partner of Great Elm Opportunities Fund I, LP (GEOF), a Delaware multi-series limited partnership. GECM serves as the investment manager of GEOF. As the general partner, GEO GP provides administrative services and oversees GECM’s management of the investment portfolio of GEOF. The Company’s wholly-owned subsidiary, GECM, serves as the managing member of Great Elm SPAC Opportunity Fund, LLC (GESOF), a Delaware limited liability company, and provides administrative services and manages the investment portfolio of GESOF.

The Company has determined that GEOF, each series of GEOF, and GESOF are VIEs and that the criteria for consolidation are met for GEOF Series C, which was launched in November 2020 and subsequently merged into GESOF, which was launched in February 2021. The operations of each of these consolidated funds (the Consolidated Funds) are included in our consolidated financial statements. See Note 2 – Summary of Significant Accounting Policies for additional details. In July 2022, GESOF liquidated and the Company received a distribution of cash and equity investments.

The Company has retained the specialized investment company accounting guidance under US GAAP with respect to the Consolidated Funds. As such, investments of the Consolidated Funds are included in the condensed consolidated balance sheets at fair value and the net unrealized gain (loss) on those investments is included as a component of other income on the condensed consolidated income statement. Non-controlling interests in these Consolidated Funds are included in net loss attributable to non-controlling interest. As of June 30, 2022 no single issuer or investment of the Consolidated Funds had a fair value greater than 5% of the Company’s total consolidated assets.

Additionally, the Company receives dividends from its investment in GECC and Monomoy UpREIT and earns unrealized profits and losses based on the mark-to-market performance of its investments in GECC and Monomoy UpREIT. See Note 8 – Fair Value Measurements.

The following tables summarize activity and outstanding balances between the managed investment products and the Company.


	For the years ended June 30,
(in thousands)	2022			2021
Net realized and unrealized gain (loss) on investments	$	(7,920	)	$	155
Net realized and unrealized gain (loss) on investments of consolidated funds		(525	)		545
Dividend income		2,809			2,954


	As of June 30,
(in thousands)	2022		2021
Dividends receivable	$	612	$	554
Investment management revenues receivable		1,241		936
Receivable for reimbursable expenses paid		592		297

F-26

Outstanding receivables are included in related party receivables in the consolidated balance sheets. Outstanding receivables from the Consolidated Funds are eliminated in consolidation. As of June 30, 2022 and 2021, the Company had $0.1 million and $0.1 million, respectively, in receivable for reimbursable expenses paid on behalf of the Consolidated Funds.

The Company owns approximately 35.4% of the outstanding shares (or 2,687,487 shares) of GECC. Certain officers and directors of GECC are also officers and directors of GEG. Matthew A. Drapkin is a director of our Board and also the Chairman of GECC's Board of Directors, and Adam M. Kleinman is our President and Chief Operating Officer as well as the Chief Compliance Officer of GECC.

On June 13, 2022, GECC completed a non-transferable rights offering in which the Company and its subsidiaries received 1,400,000 shares at a price of $12.50 per share for an aggregate total of $17.5 million.

On May 4, 2022 the Company purchased the investment management agreement of the Monomoy REIT and other assets from ICAM for consideration of $11.1 million, inclusive of a $6.3 million 6.5% promissory note (Seller Note) and potential earnout payments. Interest accrued on the Seller Note for the year ended June 30, 2022 was $0.1 million. The assembled workforce acquired in the transaction consisted of former ICAM employees. In conjunction with the transaction, GECM entered into a services agreement with ICAM. Jason W. Reese, the Executive Chairman of the Company’s Board of Directors, is the Chief Executive Officer of ICAM. Costs incurred under this agreement are reimbursed by the Monomoy REIT. For the year ended June 30, 2022, such costs were $0.1 million.

Shortly after the transaction, our existing investment in Monomoy Fund (which continues to be managed by ICAM) was redeemed and proceeds reinvested in Monomoy UpREIT.

In October 2020, GECM entered into a shared personnel and reimbursement agreement with Imperial Capital Asset Management, LLC (ICAM). Costs incurred under this agreement are included in investment management expenses in the condensed consolidated statement of operations. For the years ended June 30, 2022 and 2021, such costs were $1.1 million and $0.4 million, respectively. The Company also granted restricted stock awards to an employee of ICAM with a grant date fair value of $0.2 million during the year ended June 30, 2022 as additional compensation for consulting services performed under the shared personnel and reimbursement agreement with ICAM.

In connection with the acquisition of the durable medical equipment businesses in September 2018, DME Inc. and its subsidiaries entered into the Corbel Facility. Jeffrey S. Serota, a member of the Company’s Board of Directors, serves as Vice Chairman to Corbel Capital Partners, an affiliate of Corbel. Corbel previously held an interest in Northwest and was one of the sellers in our acquisition of the business. As a result of the acquisition, at June 30, ~~2021~~2022 Corbel holds a non-controlling interest in HC LLC. Pursuant to the Corbel Facility, Corbel was paid a structuring fee and a quarterly monitoring fee. In conjunction with the JPM Transactions, the Corbel Facility was repaid early on December 29, 2020, and DME Inc. paid a deferred structuring fee as well as a prepayment penalty. See Note 13 - Borrowings for additional information on the Corbel Facility and Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiaries.

In connection with the acquisition of the durable medical equipment businesses, the Company issued non-controlling interests in DME Inc. to the former owners, including Corbel discussed above. These non-controlling interests in DME Inc. became non-controlling interests in HC LLC in May 2021. See Note 4 – Reorganization and Financing Transactions. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary.

The Company’s wholly-owned subsidiary, GECM, has agreements to provide administrative services and manage the investment portfolio for GECC and other investment products. Under these agreements, GECM receives administrative fees, management fees based on the managed assets (other than cash and cash equivalents) and incentive fees based on the performance of those assets. See Note 3 – Revenue for additional discussions of the fee arrangements.

~~The Company’s wholly-owned subsidiary, GEO GP serves as the general partner of Great Elm Opportunities Fund I, LP (GEOF~~), a Delaware multi-series limited partnership. GECM serves as the investment manager of GEOF. As the general partner, GEO GP provides administrative services and oversees GECM’s management of the investment portfolio of GEOF. The Company’s wholly-owned subsidiary, GECM, serves as the managing member of Great Elm SPAC Opportunity Fund, LLC (~~GESOF), a Delaware limited liability company, and provides administrative services and manages the investment portfolio of GESOF.~~

The Company has determined that GEOF, each series of GEOF, and GESOF are VIEs and that the criteria for consolidation are met for one series of GEOF. This series was launched in December 2020 and began liquidation in February 2021 when the net assets of the series, which included of an interest in GESOF, were distributed to such series’ sole limited partner, the Company. The Company has determined that the criteria for consolidation are met for GESOF, which was launched in February 2021. The operations of each of these consolidated funds (the ~~Consolidated Funds) are included in our consolidated financial statements. See Note 2 – Summary of Significant Accounting Policies for additional details.~~

The Company has retained the specialized investment company accounting guidance under US GAAP with respect to the Consolidated Funds. As such, investments of the Consolidated Funds are included in the condensed consolidated balance sheets at fair value and the net unrealized gain (loss) on those investments is included as a component of other income on the condensed consolidated income statement. Non-controlling interests in these Consolidated Funds are included in ~~net loss attributable to non-controlling interest.~~General Corporate ~~As of June 30, 2021 no single issuer or investment of the Consolidated Funds had a fair value greater than 5% of the Company’s total consolidated assets.~~

Additionally, the Company receives dividends from its investment in GECC and earns unrealized profits and losses based on the mark-to-market performance of its investment in GECC. See Note 8 – Fair Value Measurements.

~~The following tables summarize activity and outstanding balances between the managed investment products and the Company.~~

Outstanding receivables are included in related party receivables in the consolidated balance sheets. Outstanding receivables from the Consolidated Funds are eliminated in consolidation. As of June 30,On August 31, 2021, the Company ~~had $0.1 million in receivable for reimbursable expenses paid on behalf of the Consolidated Funds.~~

The Company owns approximately 23.6% of the outstanding shares (or 5,539,724 shares) of GECC, and the Company’s Chief Executive Officer is also the Chief Executive Officer of GECC and Chief Investment Officer of GECM, in addition to being a member of the Board of Directors of the Company and chairman of the board of GECC. The Company’s President and Chief Operating Officer is also the Chief Operating Officer, Chief Compliance Officer and General Counsel of GECM and the Chief Compliance Officer of GECC.

~~On October 1, 2020, GECC completed a non-transferable rights offering in which the Company received 2,966,531 shares at a price of $2.95 per share for an aggregate total of $8.8 million.~~

~~GECM has a profit sharing agreement with the Company’s majority-owned subsidiary GEC GP (Profit Sharing Agreement~~). Under the Profit Sharing Agreement, GECM’s profit from GECC is paid to GEC GP. Since its inception in November 2016, GECM has operated at a cumulative loss through June 30, 2021; correspondingly, no profits were available to GEC GP under the Profit Sharing agreement. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary.

MAST Capital is the beneficial owner of approximately 7.5% of the Company’s outstanding common stock as of June 30, 2021. On March 10, 2021, the Company purchased from MAST Capital all of its previously-held shares of GP Corp., the previously-held GP Corp. Note and its previously-held board appointment rights in exchange for $2.3 million in newly issued Convertible Notes (as defined below). See Note 13 - Borrowings for additional discussion of the GP Corp. Note and Note 14 – Convertible Notes for additional discussion of the convertible notes.

~~In October 2020, GECM~~ entered into a ~~shared personnel and reimbursement~~financial advisory agreement with Imperial Capital, ~~Asset Management, LLC (~~LLC. The agreement included a retainer fee of $~~ICAM~~0.1~~). Jason W. Reese,~~ million which was paid during the ~~Executive Chairman~~current fiscal period as well as certain success-based fees related to potential future transactions.

Additionally, the Company received dividends and realized gain on its investment in Monomoy Properties, which it held for a portion of the Company’s Board of Directors, is the Chief Executive Officer of ICAM. Costs incurred under this agreement are included in investment management expenses in the condensed consolidated statement of operations. For the year ended June 30, ~~2021, such costs were $0.4 million.~~2022 Monomoy Properties is managed by ICAM. The following table summarizes the Company's activity related to Monomoy Properties


(in thousands)	For the year ended June 30, 2022
Net realized gain on investment	$	349
Dividend income		350

In conjunction with the JPM Transactions, on December 29, 2020 Forest sold Forest Preferred Stock and the Company sold common stock in Forest to JPM for cash consideration of ~~$35.0~~$35.0 million and ~~$2.7~~$2.7 million, respectively. As a result of these transactions, JPM holds a non-controlling interest in Forest. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiaries.

On December 18, 2020, the Company purchased from JPM a ~~21%~~21% common stock interest in Ligado Networks, LLC (Ligado), a privately-held Company. The common stock interest does not convey the ability to exercise significant influence over Ligado, and therefore does not require accounting in accordance with the equity method. We have elected to account for this investment, which does not have a readily-determinable fair value, at cost minus impairment. This investment is included in prepaid and other current assets on our consolidated balance sheet.

On June 23, 2021, the Company sold its real estate business to Monomoy FM. Monomoy FM is a majority-owned subsidiary of Monomoy Fund, and pursuant to the purchase agreement the Company subsequently invested the proceeds of the sale in Monomoy Fund. Monomoy Fund is managed by ICAM. See Note 5 – Discontinued Operations.

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

US GAAP provides a framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

All financial assets or liabilities that are measured at fair value on a recurring and ~~non-recurring~~non-recurring basis have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

The assets and liabilities measured at fair value on a recurring and ~~non-recurring~~non-recurring basis are summarized in the tables below:


	Fair Value as of June 30, 2021								Fair Value as of June 30, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Equity investments	$	19,444	$	0	$	0	$	19,444	$	27,678	$	-	$	-	$	27,678
Equity investments of Consolidated Funds		26,490		0		0		26,490		1,797		-		-		1,797
Total assets within the fair value hierarchy	$	45,934	$	0	$	0	$	45,934	$	29,475	$	-	$	-	$	29,475
Investments valued at net asset value							$	4,600							$	20,363
Total assets							$	50,534							$	49,838
Liabilities:
Participation feature of HC LLC Series A-2 Preferred Stock	$	0	$	0	*		*		$	-	$	-	*		*
Contingent consideration liability		0		0		271		271		-		-		1,767		1,767
Total liabilities	$	0	$	0	$	271	$	271	$	-	$	-	$	1,767	$	1,767

* Balance eliminates in consolidation.


	Fair Value as of June 30, 2020								Fair Value as of June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Equity investments	$	8,705	$	0	$	0	$	8,705	$	19,444	$	-	$	-	$	19,444
Equity investments of Consolidated Funds										26,490						26,490
Total assets									$	45,934	$	-	$	-	$	45,934
Investments valued at net asset value															$	4,600
Total assets	$	8,705	$	0	$	0	$	8,705							$	50,534
Liabilities:
Participation feature of HC LLC Series A-2 Preferred Stock									$	-	$	-	*		*
Contingent consideration liability	$	0	$	0	$	0	$	0		-		-		271		271
Total liabilities	$	0	$	0	$	0	$	0	$	-	$	-	$	271	$	271

There were 0no transfers between levels of the fair value hierarchy during the years ended June 30, ~~2021~~2022 and ~~2020.~~2021.

The following is a reconciliation of changes in contingent consideration, a Level 3 liability:


	For the years ended June 30,						For the years ended June 30,
(in thousands)	2021			2020			2022			2021
Beginning Balance	$	-		$	1,135		$	271		$	-
Additions		397			-			1,617			397
Payments		-			-			-			-
Change in fair value		(126	)		(1,135	)		(121	)		(126	)
Ending Balance	$	271		$	-		$	1,767		$	271

The valuation techniques applied to investments held by the Company and by the Consolidated Funds vary depending on the nature of the investment.

Securities traded on a national securities exchange are stated at the close price on the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level 1.

The Company values investments in private funds using net asset value (NAV) as reported by each fund’s investment manager. The private funds calculate NAV in a manner consistent with the measurement principles of FASB Topic 946, Financial Services – Investment Companies, as of the valuation date. Investments valued using NAV as a practical expedient are not categorized within the fair value hierarchy.

As of June 30, 2022, investments in private funds consist of our investment in Monomoy UpREIT and Sharp Alpha Fund I, LP (Sharp Alpha), a closed-end limited partnership focused on gaming technologies. Monomoy UpREIT allows redemptions annually with 90 days’ notice subject to a one-year lockup from the date of initial investment. Sharp Alpha does not allow for redemptions. Distributions will be received as the underlying assets are liquidated over the life of the fund, which is expected to be approximately 10 years. As of June 30, 2022 there are no unfunded commitments.

As of June 30, 2021, investments in private funds ~~consist~~consisted of our investment in ~~the~~ Monomoy Fund, an industrial real estate-focused fund. Redemptions are allowed annually with 90 ~~days’~~ days' notice subject to a one-year lockup from the date of initial investment. There ~~are~~were no unfunded commitments.

The previous contingent consideration arrangement required the Company to pay up to $2.1 million of additional consideration to the former shareholders of the durable medical equipment businesses if certain earnings before interest, taxes, depreciation and amortization (~~EBITDA~~) thresholds, as adjusted per the terms of the purchase agreement, were achieved for the 12 months ended December 31, 2019. The Company determined that the EBITDA achieved, as adjusted per terms of the contract, for the 12 months ended December 31, 2019 was below the earnout threshold for payout. As such, during the year ended June 30, 2020, the fair value of the contingent consideration was updated to 0. This determination of the earnout was finalized and agreed to with the former shareholders of the durable medical equipment businesses during the quarter ended December 31, 2020.

In conjunction with the acquisition of AMPM on March 1, 2021, the Company entered into a ~~separate~~ contingent consideration agreement that requires the Company to pay up to ~~$2.1~~$2.1 million if certain revenue thresholds of the acquired business are achieved for the 12 months ending September 1, 2022. As of June 30, 2022, projected revenues through September 1, 2022 are not expected to be achieved and the fair value of the contingent consideration has been updated to zero, resulting in a $0.3 million benefit which is included in durable medical equipment other operating expenses.

In conjunction with the acquisition of MedOne on August 31, 2021, the Company entered into a contingent consideration agreement that requires the Company to pay up to $1.0 million if certain revenue thresholds of the acquired business are achieved for the 12 months ending September 1, 2022 and September 1, 2023. The Company estimated the fair value of the contingent consideration using a Monte Carlo simulation model. The key assumptions in applying the Monte Carlo simulation model as of ~~the acquisition date~~June 30, 2022 include volatility of ~~40.0%~~27.6% and a discount rate of ~~10.3%~~7.6%. The fair value adjustments during the year ended June 30, 2022 resulted in a $0.2 million charge which is included in durable medical equipment other operating expenses.

In conjunction with the acquisition of the Monomoy REIT investment management agreement, the Company entered into a contingent consideration agreement that requires the Company to pay up to $2.0 million if certain fee revenue thresholds are achieved during fiscal years ended June 30, 2023 and 2024. The Company estimated the fair value of the contingent consideration using a Monte Carlo simulation model. The key assumptions in applying the Monte Carlo simulation model as of June 30, ~~2021~~2022 include revenue forecasts, volatility of ~~28.6%~~19.6% and a discount rate of ~~10.3%~~6.5%.

The contingent consideration is included within the other liabilities in the consolidated balance sheets.

On December 29, 2020, in conjunction with the JPM Transactions, the Company issued HC LLC Series A-2 Preferred Stock to our consolidated subsidiary, Forest. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiaries. An embedded derivative was identified in the instrument requiring bifurcation from the host instrument as a derivative to be carried at fair value. The value of the derivative related to a participation feature upon the sale of the durable medical equipment business. As of the issuance date, the fair value was determined using an option pricing model based on the transaction price. The key assumptions used in the option pricing model include a volatility rate of ~~72.7%~~72.7% and an option term of 3 years. Subsequent to the issuance date, the fair value of this derivative is determined at each balance sheet date using an option pricing model based on the estimated value of HC LLC. This fair value is derived from a discounted cash flow income approach and a guideline public company market approach. The key assumptions in applying the valuation approach as of June 30, 2022 and 2021, include financial forecasts of the durable medical equipment business, a discount rate of ~~14.5%~~13.0% and 14.5%, respectively, and a volatility rate of ~~50.4%~~59.1% and 50.4%, respectively (level 3 inputs in accordance with the US GAAP fair value hierarchy). The fair value of the embedded derivative as of ~~the issuance date and as of~~ June 30, 2022 and 2021 was ~~$6.5~~$7.9 million and ~~$5.8~~$5.8 million, respectively. Since the HC LLC Series A-2 Preferred Stock are issued to Forest, a consolidated subsidiary, the instruments and their effects on our operations have been eliminated in consolidation and therefore the valuation of the participation feature is reflected as 0zero within the table above. However, this valuation does impact our segment results and non-controlling interest accounts.

See Note 13 - Borrowings for additional discussion related to the fair value of notes payable. The carrying value of all other financial assets and liabilities approximate their fair values.

The Company’s fixed assets consist of its medical equipment held for rental, furniture and fixtures, and leasehold improvements used in its operations. The following tables detail the Company’s fixed assets:

(in thousands)

June 30, 2021

June 30, 2020

Property and Equipment

Leasehold improvements

$
835

$
858

Vehicles

172

237

Computer equipment and software

500

298

Furniture and fixtures

422

394

Sleep study equipment

593

589

2,522

2,376

Accumulated depreciation

(1,541
)

(966
)
Net carrying amount

$
981

$
1,410

Medical Equipment Held for Rental

Medical equipment held for rental

$
14,933

$
13,828

Accumulated depreciation

(7,542
)

(6,345
)
Net carrying amount

$
7,391

$
7,483

The following table reconciles depreciation expense included in the following lines of the consolidated statements of operations to total depreciation expense for each period presented.


	For the years ended June 30,
(in thousands)	2022		2021
Depreciation and amortization	$	563	$	693
Cost of durable medical equipment rentals		6,527		6,286
Total depreciation expense	$	7,090	$	6,979

For the years ended June 30,

(in thousands)

2021

2020

Depreciation and amortization

$
693

$
645

Cost of durable medical equipment rentals

6,286

8,267

Total depreciation expense

$
6,979

$
8,912

10.

Goodwill and Other Intangible Assets

~~10.~~

~~Goodwill and Other Intangible Assets~~

The Company’s investment management and durable medical equipment segments include identifiable intangible assets acquired through acquisitions in prior years. Goodwill presented on the consolidated balance sheet consists only of the goodwill acquired as part of the acquisitions of the durable medical equipment businesses.

The changes in the carrying value of goodwill are as follows:


	For the years ended June 30,						For the years ended June 30,
(in thousands)	2021			2020			2022		2021
Beginning Balance	$	50,010		$	50,397		$	50,536	$	50,010
Acquisitions		648			-			1,927		648
Purchase accounting adjustment		(122	)		(387	)		-		(122	)
Ending Balance	$	50,536		$	50,010		$	52,463	$	50,536

The Company’s annual impairment assessment date for goodwill is April 1. No impairment triggering events have been identified since our prior year annual impairment analysis. In the current year, we performed a quantitative impairment test for our annual impairment assessment. Based on the analyses performed, the fair value of the durable medical equipment reporting unit exceeded the carrying value by ~~73%~~34% and 0no impairment was noted. 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. The discount rate used in this analysis was ~~15.5%.~~ 13.0% and revenue and EBITDA multiples averaged 1.2x and 7.5x, respectively.

~~F-29~~

The following tables provide additional detail related to the Company’s acquired identifiable intangible assets:


	As of June 30, 2021							As of June 30, 2020							As of June 30, 2022							As of June 30, 2021
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Durable Medical Equipment
Tradename	$	9,060	$	(2,511	)	$	6,549	$	8,800	$	(1,613	)	$	7,187	$	9,060	$	(3,443	)	$	5,617	$	9,060	$	(2,511	)	$	6,549
Hospital Contracts		90		(15	)		75		-		-			-		90		(49	)		41		90		(15	)		75
Non-compete agreements		1,370		(890	)		480		1,360		(573	)		787		1,370		(1,107	)		263		1,370		(890	)		480
		10,520		(3,416	)		7,104		10,160		(2,186	)		7,974		10,520		(4,599	)		5,921		10,520		(3,416	)		7,104

Investment Management
Investment management agreement		3,900		(2,293	)		1,607		3,900		(1,887	)		2,013
Assembled workforce		526		(309	)		217		526		(255	)		271
Investment management agreements																15,264		(2,753	)		12,511		3,900		(2,293	)		1,607
Assembled workforces																1,103		(364	)		739		526		(309	)		217
		4,426		(2,602	)		1,824		4,426		(2,142	)		2,284		16,367		(3,117	)		13,250		4,426		(2,602	)		1,824

Total	$	14,946	$	(6,018	)	$	8,928	$	14,586	$	(4,328	)	$	10,258	$	26,887	$	(7,716	)	$	19,171	$	14,946	$	(6,018	)	$	8,928


Aggregate Amortization Expense (in thousands):
For the year ended June 30, 2022			$	1,698
For the year ended June 30, 2021	$	1,690		1,690
For the year ended June 30, 2020		1,869


Estimated Future Amortization Expense (in thousands):
For the year ending June 30, 2023	$	2,283
For the year ending June 30, 2024		2,084
For the year ending June 30, 2025		1,974
For the year ending June 30, 2026		1,912
For the year ending June 30, 2027		1,838
Thereafter		9,080
Total		19,171

All of the Company’s leases are operating leases. Certain of the leases have both lease and non-lease components. The Company has elected to account for the lease component and the non-lease components as a single combined lease component for all classes of underlying assets. The following table provides additional details of the leases presented in the balance sheets:


(in thousands)	June 30, 2021			June 30, 2020			June 30, 2022			June 30, 2021
Facilities
Right of use assets	$	5,121		$	5,265		$	3,400		$	5,121

Current portion of lease liabilities		1,864			1,560			1,475			1,864
Lease liabilities, net of current portion		3,532			3,990			2,137			3,532
Total liabilities	$	5,396		$	5,550		$	3,612		$	5,396

Weighted-average remaining life	3.3 years			3.9 years			3.1 years			3.3 years
Weighted-average discount rate		11.0	%		11.7	%		10.8	%		11.0	%

Vehicles
Right of use assets	$	87		$	61		$	315		$	87

Current portion of lease liabilities		29			20			77			29
Lease liabilities, net of current portion		58			41			238			58
Total liabilities	$	87		$	61		$	315		$	87

Weighted-average remaining life	3.9 years			2.8 years			4.2 years			3.9 years
Weighted-average discount rate		9.8	%		12.3	%		6.3	%		9.8	%

Equipment
Right of use assets	$	33		$	66		$	7		$	33

Current portion of lease liabilities		27			37			7			27
Lease liabilities, net of current portion		6			29			-			6
Total liabilities	$	33		$	66		$	7		$	33

Weighted-average remaining life	1.0 years			2 years			0.8 years			1.0 years
Weighted-average discount rate		12.5	%		12.5	%		12.5	%		12.5	%

As of June 30, ~~2021,~~2022, the Company had total right of use assets of ~~$5.2~~$3.7 million and lease liabilities of ~~$5.5~~$3.9 million (consisting of ~~$1.9~~$1.5 million in current portion of lease liabilities and ~~$3.6~~$2.4 million in lease liabilities, net of current portion) on the consolidated balance sheet related to the leases discussed herein. As of June 30, ~~2020,~~2021, the Company had total right of use assets of ~~$5.4~~$5.2 million and lease liabilities of ~~$5.7~~$5.5 million (consisting of ~~$1.6~~$1.9 million in current portion of lease liabilities and ~~$4.1~~$3.6 million in lease liabilities, net of current portion) on the consolidated balance sheet related to the leases discussed herein. The discount rate for each lease is based on the collateralized borrowing rate at the inception of the lease.

~~F-31~~

Operating lease costs are included in the operating expense associated with the business segment leasing the asset on the statements of operations and are included in cash flows from operating activities on the statements of cash flows. Certain operating leases include variable lease costs which are not material and are included in operating lease costs. Additional details are presented in the following table:


	For the years ended June 30,
(in thousands)	2022		2021
Facilities
Operating lease cost	$	2,266	$	2,469
Cash paid for operating leases		1,795		1,973

Vehicles
Operating lease cost	$	67	$	50
Cash paid for operating leases		67		50

Equipment
Operating lease cost	$	28	$	61
Cash paid for operating leases		28		61

For the years ended June 30,

(in thousands)

2021

2020

Facilities

Operating lease cost

$
2,469

$
2,097

Cash paid for operating leases

1,973

2,071

Vehicles

Operating lease cost

$
50

$
27

Cash paid for operating leases

50

27

Equipment

Operating lease cost

$
61

$
45

Cash paid for operating leases

61

45

The following table summarizes the Company’s undiscounted cash payment obligations for its operating leases:

The facility leases include offices, retail and warehouse space and sleep labs. The facility leases have original or amended terms ranging from 12 to 96 months, some of which include an additional option to extend the lease for up to 120 months. Certain of these leases have variable rental payments tied to a consumer price index or include additional rental payments for maintenance costs, taxes and insurance, which are accounted for as variable rent.

The vehicles leases have original lease terms of 60 months from the commencement date of each lease with no option to extend. Each lease may be terminated by the lessee with 30-days’ notice after the first 13 months of the lease subject to certain early termination costs, including residual value guarantees. The lease costs include variable payments for taxes and other fees.

Equipment leases consist of office equipment with original lease terms ranging from 36 to 48 months from the commencement date of each lease and may include an option to extend or purchase at the end of the lease term. Certain of these leases include additional rental costs for taxes, insurance and additional fees in addition to the base rental costs.

A lease for office space located in Charleston, South Carolina was assumed as part of the acquisition of the Monomoy REIT investment management agreement in May 2022. The non-cancellable lease term expires October 1, 2024, and lease payments are approximately $3 thousand per month.

The Company entered into a lease for office space located in Waltham, MA. This office space is allocated between the investment management and general corporate segments. On the commencement date of the lease, the non-cancellable term was for eighty-eight months from the occupancy date of June 1, 2017 and contains an option to extend for an additional sixty-month period.

The lease payments commenced on October 1, 2017, four months after the Company began to occupy the space. On an annual basis, the lease payments increase at an average rate of approximately ~~2.4%~~2.4% from ~~$28~~$28 to ~~$32~~$32 thousand per month.

Related party borrowings of the Company’s subsidiaries are summarized in the following table:

The Company’s and subsidiaries’ other outstanding borrowings are summarized in the following table:


		As of June 30,							As of June 30,
(in thousands)	Subsidiaries	2021			2020			Subsidiaries	2022			2021
GEGGL Notes								GEG	$	26,945		$	-
DME Revolver	HC LLC and subsidiaries	$	-		$	3,900		HC LLC and subsidiaries		-			-
Equipment Financing	HC LLC and subsidiaries		2,041			2,230		HC LLC and subsidiaries		2,993			2,041
Total principal		$	2,041		$	6,130			$	29,938		$	2,041
Unamortized debt discounts and issuance costs			-			(5	)			(1,413	)		-
Total other outstanding borrowings			2,041			6,125				28,525			2,041
Less current portion of other outstanding borrowings			(1,974	)		(5,929	)			(2,993	)		(1,974	)
Other outstanding borrowings, net of current portion		$	67		$	196			$	25,532		$	67

The Company incurred interest expense on these borrowings of ~~$3.2~~$4.0 million and ~~$3.8~~$3.2 million for the years ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

The Company’s aggregate future required principal debt repayments are summarized in the following table:


(in thousands)	Principal Due		Principal Due
For the year ending June 30, 2022	$	1,974
For the year ending June 30, 2023		67	$	2,993
For the year ending June 30, 2024				6,270
For the year ending June 30, 2025				-
For the year ending June 30, 2026				-
For the year ending June 30, 2027				26,945
Thereafter				-
Total	$	2,041	$	36,208

In connection with the acquisition of DME Inc., the Company assumed a secured note (Corbel Facility) with a principal balance of ~~$8.5~~$8.5 million, which was amended and increased to ~~$25~~$25 million concurrent with the closing of the acquisition described in Note 6 – Acquisitions. In addition, the Company assumed and expanded a revolving line of credit agreement with Banc of California (formerly Pacific Mercantile ~~Bank~~Bank) (DME Revolver) with a principal balance of ~~$0.8~~$0.8 million, which was amended and increased to ~~$6.3~~$6.3 million at the date of acquisition.

The Corbel Facility was repaid on December 29, 2020. The repayment included deferred structuring fees of ~~$0.6~~$0.6 million, prepayment premiums and settlement fees of ~~$1.0~~$1.0 million, and lender legal fees of ~~$0.1~~$0.1 million. In addition, upon repayment, the Company wrote off the remaining unamortized debt issuance costs of ~~$0.2~~$0.2 million, resulting in an aggregate ~~$1.9~~$1.9 million loss on extinguishment of debt.

The Corbel Facility was held by Corbel, a related party, which also holds a non-controlling interest in DME Inc. and HC LLC Series A-1 Preferred Stock. See Note 7 – Related Party Transactions and Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary.

Principal payments and interest expense incurred on the Corbel Facility ~~are summarized in~~for the ~~following table:~~

There were 0no borrowings outstanding under the DME Revolver at June 30, ~~2021.~~2022. The DME Revolver allows for borrowings up to ~~$10~~$10 million, subject to a fixed percentage of qualifying accounts receivables and inventories related to the durable medical equipment business operations. Borrowings under the line of credit are due on November 29, 2022 and accrue interest at a variable rate of the prime rate plus ~~0.40%~~0.40% per ~~annum.~~annum. At June 30, ~~2021~~2022 the interest rate was ~~3.7%~~5.2%. Interest is payable monthly in arrears. The Company has the option to prepay the borrowings without any penalty.

The borrowings under the DME Revolver are collateralized by the assets of the durable medical equipment business and the Company is required to meet certain financial covenants.

The DME Revolver includes covenants that restrict HC LLC’s and its subsidiaries’ business operations to its current business, limit additional indebtedness, liens, asset dispositions and investments, require compliance and maintenance of licenses and government approvals and other customary conditions. Events of default include the failure to pay amounts when due, bankruptcy, or violation of covenants, including a change in control of HC LLC. HC LLC must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the HC LLC EBITDA levels. The Company was in compliance with all material covenants and restrictions at June 30, ~~2021.~~2022.

HC LLC’s operating subsidiaries also utilize equipment financing debt to fund certain inventory and equipment purchases from suppliers. These equipment financing debt agreements are entered into with 3rd party banks and are generally payable in equal installments over terms of one to three years, depending on the nature of the underlying purchases being financed. The debt is secured by the inventory and equipment, as applicable, of the operating subsidiaries entering into the agreements, and the long-term agreements have implicit interest rates between 7 – 8%8%. The Company financed ~~$3.6~~$6.4 million and ~~$3.6~~$3.6 million in inventory and equipment through such financing agreements during the years ended June 30, 2022 and 2021, respectively.

On May 4, 2022 as part of the consideration paid to acquire the Monomoy REIT asset management agreement, GECM issued ICAM a $6.3 million promissory note (the Seller Note). The Seller Note is due on August 4, 2023and is payable at GECM’s option with either cash, GECC shares owned by GEG, or newly issued GEG shares (subject to shareholder approval). There are no prepayment penalties. The Seller Note bears interest at 6.5%, which is paid quarterly.

During the year ended June 30, ~~2020, respectively.~~2022, the Company incurred $0.1 million in interest expense on the Seller Note. There were no principal payments made during the year ended June 30, 2022.

As part of the entry into the investment management business, the Company acquired certain assets from MAST Capital Management, LLC (MAST Capital) and in consideration for those assets, GP Corp. issued a senior secured note payable (the GP Corp. Note). The GP Corp. Note matures in November 2026, accrues interest at a variable rate of three-month LIBOR plus ~~3.0%~~3.0% per annum and is secured by a profit sharing agreement related to GECM’s management of GECC. On March 10, 2021, GEG purchased the GP Corp. Note as well as non-controlling interests in GP Corp. and certain board appointment rights from MAST Capital. In exchange, GEG issued ~~$2.3~~$2.3 million of Convertible Notes. As MAST Capital iswas a related party, no gain was recorded on the transaction. The difference in carrying value between the instruments purchased (including the GP Corp. Note and MAST Capital’s non-controlling interests) and that of the newly issued convertible notes was treated as a capital contribution and recorded to additional paid in capital in the amount of ~~$0.6~~$0.6 million.

~~Payments and~~During the year ended June 30, 2021, the Company incurred interest expense ~~incurred~~of $0.1 million on the GP Corp. ~~Note are summarized in the following table:~~

⁽¹⁾Note. Principal payments made and interest ~~amounts incurred~~expense accrued after ~~GEG’s purchase~~March 10, 2021 are eliminated in consolidation.

On June 9, 2022, we issued $26.9 million in aggregate principal amount of 7.25% Notes due 2027 (the GEGGL Notes), which included $1.9 million of GEGGL Notes issued in connection with the partial exercise of the ~~GP Corp. note~~underwriters’ over-allotment option. The aggregate principal balance of the GEGGL Notes outstanding as of June 30, 2022 is $26.9 million. The GEGGL Notes are ~~not reported~~unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated, or junior in ~~this table, as they eliminate in consolidation.~~

~~14.~~right of payment, to indebtedness under our Convertible Notes and any other future secured indebtedness that we may incur and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the GEGGL Notes on March 31, June 30, September 30 and December 31 of each year. The GEGGL Notes will mature on June 30, 2027. The GEGGL Notes can be called on, or after, June 30, 2024. Holders of the Notes do not have the option to have the Notes repaid prior to the stated maturity date. The Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

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 of 2:1. As of June 30, 2022 our consolidated debt to equity ratio is 1.2:1.

Additionally, pursuant to the CARES Act, Congress appropriated $100 billion in relief funds for hospitals and healthcare providers through grants administered by the U.S. Department of Health and Human Services (~~HHS~~). Qualified providers of healthcare, services and support may receive HHS grants for healthcare-related expenses or lost revenue due to the COVID-19 pandemic. Retention and use of the HHS grants are subject to certain terms and conditions including that such grant funds may only be used to prevent, prepare for, and respond to COVID-19 and such grant funds will reimburse only healthcare-related expenses or lost revenues that are attributable to the COVID-19 pandemic. If these terms and conditions are met, HHS grants do not need to be repaid. In April 2020, subsidiaries of Great Elm DME Inc. received $1.4 million in HHS grantsto continue providing health care treatment to patients during the COVID-19 pandemic. Between the date of funding and June 30, 2020, the Company used these funds as authorized by the HHS grant and has recognized the proceeds as a reduction to operating expenses. We will continue to monitor our compliance with the terms and conditions of the HHS grant and any additional requirements if and when they become applicable.

~~We have accounted for such proceeds as in-substance government grants by analogizing to International Accounting Standard 20,~~ ~~Accounting for Government Grants and Disclosure of Government Assistance~~.

On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 expanded certain benefits made available under the ~~CARES~~enhanced Coronavirus Aid, Relief, and Economic Security Act, including modifying and extending the Employee Retention Credit (~~ERC~~)(ERC). As modified, the ERC provides eligible employers with less than 500 employees a refundable tax credit against the employer’s share of social security taxes. The ERC is equal to ~~70%~~70% of qualified wages paid to employees during calendar 2021 for a maximum credit per employee of ~~$7,000~~$7,000 per employee for each calendar quarter through ~~June~~September 30, 2021. During the year ended June 30, 2021, the Company claimed ERCs of ~~$5.0~~$5.0 million, consisting of ~~$4.8~~$4.8 million recognized as a reduction to operating expenses and ~~$0.2~~$0.2 million acquired in purchase accounting. Such claimed ERCs not settled prior to ~~year end~~June 30, 2021 in the amount of ~~$2.8~~$2.8 million ~~are expected to be~~were settled shortly thereafter and are disclosed within prepaid and other current assets on our consolidated balance sheet. In addition to claiming ERC’s during the prior fiscal year, the Company claimed and collected additional ERCs of $2.4 million during the year ended June 30, 2022.

We have accounted for such proceeds as in-substance government grants by analogizing to International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance.

Holders of non-controlling interests (NCI) or preferred stock in a subsidiary of the Company hold certain rights, which result in the classification of the securities as either liability, temporary equity or permanent equity. The following table summarizes the non-controlling interest balances on the consolidated balance sheets:

The following table summarizes the net income (loss) attributable to the non-controlling interests on the consolidated statements of operations:


	For the years ended June 30,						For the years ended June 30,
(in thousands)	2021			2020			2022			2021
DME Inc.
Temporary equity		(263	)		(22	)		-			(263	)
Permanent equity		(263	)		(22	)		-			(263	)
Total DME Inc.		(526	)		(44	)		-			(526	)
HC LLC
Temporary equity		-			-			(414	)		-
Permanent equity		-			-			(414	)		-
Total HC LLC		-			-			(828	)		-
GP Corp.
Permanent equity		(87	)		(156	)		-			(87	)
GEC GP
Permanent equity		(1	)		-			(6	)		(1	)
Consolidated Funds
Permanent equity		(96	)		-			(215	)		(96	)
Forest
Permanent equity		62			-			905			62
FM Holdings
Permanent equity		53			48			-			53
Total	$	(595	)	$	(152	)	$	(144	)	$	(595	)

In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued a ~~9.95%~~9.95% common stock equity ownership in DME Inc. The holder of the interest has a board observer rights for the DME Inc. board of directors, but no voting rights. DME Inc. has the right of first offer if the holder desires to sell the security and in the event of a sale of DME Inc., the holder must sell their securities (drag along rights) and has the right to participate in sales of DME Inc. securities (tag along rights). In addition, upon the seventh anniversary of issuance date, if (i) the holder owns at least 50% of the common shares issued to it at the closing of the transaction, (ii) an initial public offering of DME Inc. has not commenced and (iii) the holder has not had an earlier opportunity to sell its shares at their fair market value, the holder has the right to request a marketing process for a sale of DME Inc. and has the right to put its common shares to DME Inc. at the price for such shares implied by such marketing process. The Company also has the right to call the holder’s common shares at such price. The holder of the non-controlling interest is entitled to participate in earnings of DME Inc. and is not required to fund losses. As the redemption is contingent upon future events outside of the Company’s control which are not probable, the Company has classified the non-controlling interest as temporary equity and its fair value on the date of issuance, adjusted for any earnings in DME Inc.

As a result of the reorganization discussed in Note 4 – Reorganization and Financing Transactions the non-controlling interests in DME Inc. became non-controlling interests in HC LLC on May 31, 2021.

The holder of this non-controlling interest, Corbel, is also the holder of the Series A-1 Preferred Stock and previously was the holder of the Corbel Facility. See Note 7 – Related Party Transactions and Note 13 – Borrowings.

In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued one of the former owners, a ~~9.95%~~9.95% common stock equity ownership in DME Inc. The rights are consistent with the non-controlling interest classified as temporary equity, other than the holder does not have a contingent put right. Accordingly, Company has classified the non-controlling interest as permanent equity at its fair value on the date of issuance, adjusted for any earnings in DME Inc.

In connection with the acquisition of the investment management business in November 2016, the Company issued certain affiliates and employees of the Company a ~~19.9%~~19.9% interest in GP Corp. During the year ended June 30, 2021, the Company repurchased ~~18.1%~~18.1% of such interests, leaving a ~~1.8%~~1.8% non-controlling interest in GP Corp. as of June 29, 2021. Great Elm Group, Inc’s ~~98.2%~~98.2% interest in GP Corp was then exchanged for a direct interest in GP Corp’s wholly-owned GEC GP. Following the consummation of the reorganization on June 29, 2021, the Company no longer has an interest in GP Corp.

As described above, on June 29, 2021 Great Elm Group, Inc. exchanged their ~~98.2%~~98.2% interests in GP Corp for an identical ~~98.2%~~98.2% direct interest in GP Corp’s wholly-owned subsidiary GEC GP. GEC GP owns the rights to the Profit Sharing Agreement with GECM as well as an intercompany obligation under the GP Corp. Note.

~~The holder~~During the year ended June 30, 2022, the Company purchased the remaining shares of ~~the~~in GEC GP. As of June 30, 2022, no non-controlling interest ~~is an employee of GECM and is entitled to participate in the cumulative earnings generated by the IMA.~~remains outstanding.

In connection with the JPM Transactions on December 29, 2020, the Company sold JPM a ~~20.0%~~20.0% common stock interest in Forest in exchange for ~~$2.7~~$2.7 million. JPM has a representative on the Forest board of directors and the right to designate a number of directors commensurate with their common stock ownership interest. Forest has the right of first offer if the holder desires to sell the security and in the event of a sale of Forest, the holder must sell their securities (drag along rights) and has the right to participate in sales of Forest securities (tag along rights). The holder of the non-controlling interest is entitled to participate in earnings of Forest and is not required to fund losses.

The holder of this non-controlling interest, JPM, is also the holder of Forest Preferred Stock discussed below. See Note 7 – Related Party Transactions.

As of June 30, 2022 and 2021, GEG held ~~71.3%~~73.4% and 71.3%, respectively, of the capital in GESOF. The remaining capital in GESOF is recorded as a non-controlling interest. These non-controlling interests of GESOF include affiliated individuals and entities.

In connection with the acquisition of the real estate business in March 2018, the Company issued the former owner a ~~19.9%~~19.9% interest in FM Holdings. The real estate business was sold in June 2021. See Note 5 – Discontinued Operations.

The following table summarizes the preferred stock ~~activity for the year ended June 30, 2021:~~activity:


	Balance, as of June 30, 2020		Issuance of Preferred Stock		Redemption of Preferred Stock		Balance, as of June 30, 2021		Balance, as of June 30, 2021		Issuance of Preferred Stock		Redemption of Preferred Stock		Balance, as of June 30, 2021		Issuance of Preferred Stock		Redemption of Preferred Stock			Balance, as of June 30, 2022
HC LLC
Series A-1 Preferred Stock		-		10,090		-		10,090		-		10,090		-		10,090		-		(6,000	)		4,090
Series A-2 Preferred Stock		-		34,010		-		34,010		-		34,010		-		34,010		-		-			34,010
Total HC LLC		-		44,100		-		44,100		-		44,100		-		44,100		-		(6,000	)		38,100
Forest
Forest Preferred Stock		-		35,010		-		35,010		-		35,010		-		35,010		-		-			35,010
Total		-		79,110		-		79,110		-		79,110		-		79,110		-		(6,000	)		73,110

In connection with the JPM Transactions, the Company issued 10,090 shares of Series A-1 Preferred Stock with a face value of ~~$1,000~~$1,000 per share at issuance. The shares were issued pro-rata to the stockholders of DME Inc. in the form of a distribution and 0no consideration was provided in exchange for such instruments. The shares provide for a 9%9% annual dividend, which is payable quarterly. The shares are mandatorily redeemable by the Company at their face value of ~~$1,000~~$1,000 per share on the earlier of certain redemption events or December 29, ~~2027.~~2027. The redemption events include a bankruptcy, change in control or sale of the durable medical equipment business. The shares are redeemable at any time at the option of Company at a redemption price equal to face value. The shares rank senior and have preference to the common shares of HC LLC. The shares are non-voting, do not participate in the earnings of HC LLC and contain standard protective rights. During the year ended June 30, 2022, the Company optionally redeemed 6,000 shares of Series A-1 Preferred Stock on a pro-rata basis with holders.

As the shares of Series A-1 Preferred Stock are mandatorily redeemable at a specified date, the security has been classified as a liability in the consolidated balance sheet. The dividends on the shares are included in interest expense in the consolidated statement of operations.

The fair value of each share of Series A-1 Preferred Stock on the issuance date was determined to be ~~$801~~$801 per share. The difference between the fair value and the redemption value of ~~$1,000~~$1,000 per share as well as debt issuance costs of ~~$0.2~~$0.2 million is accounted for as a debt discount and accretion of the discount will be charged to interest expense over the ~~7-year~~7-year period to redemption using the effective interest method.

The holders of the Series A-1 Preferred Stock include our majority-owned consolidated subsidiary Forest ~~(8,082~~(3,276 shares), as well as Corbel and VHG (each ~~1,004~~407 shares), who are also the holders of non-controlling interests in DME Inc. discussed above. See Note 7 – Related Party Transactions. Such shares of Series A-1 Preferred Stock issued to consolidated subsidiaries and their effects on our operations have been eliminated in consolidation.

In connection with the JPM Transactions, the Company issued 34,010 shares of Series A-2 Preferred Stock with a face value of ~~$1,000~~$1,000 per share at issuance. The shares were issued to Forest in exchange for cash equal to the face value of such shares. The shares provide for a 9%9% annual dividend, which is payable quarterly. The shares are mandatorily redeemable by the Company at their face value of ~~$1,000~~$1,000 per share on December 29, 2027, or at a ~~0-3%~~0-3% premium decreasing over time based upon the occurrence of certain redemption events prior to December 29, 2027. The redemption events include a bankruptcy, change in control or sale of the durable medical equipment business. The shares are redeemable at any time at the option of Company at a redemption price at face value plus the ~~0-3%~~0-3% premium then in place. The shares rank senior and have preference to the common shares of HC LCC. The shares are non-voting and contain standard protective rights. In addition, upon a sale of the durable medical equipment business, the holders of HC LLC Series A-2 Preferred Stock are entitled to the greater of their liquidation preference or ~~33%~~33% of proceeds arising from such sale.

As the shares of Series A-2 Preferred Stock are mandatorily redeemable at a specified date, the security has been classified as a liability in the consolidated balance sheet. The dividends on the shares are included in interest expense in the consolidated statement of operations.

We have identified the feature allowing holders of the HC LLC Series A-2 Preferred Stock to participate in up to 33% of proceeds arising from a sale of the durable medical equipment business as an embedded derivative. We have bifurcated this embedded derivative from the mandatorily redeemable preferred stock host and have recorded the derivative liability at fair value. The fair value of the derivative liability on the issuance date was ~~$6.5~~$6.5 million, and will be marked to fair value at each reporting date going forward. The fair value of each share of Series A-2 Preferred Stock on the issuance date was determined to be ~~$810~~$810 per share. The difference between the fair value and the redemption value of ~~$1,000~~$1,000 per share as well as debt issuance costs of ~~$1.1~~$1.1 million is accounted for as a debt discount and accretion of the discount will be charged to interest expense over the ~~7-year~~7-year period to redemption using the effective interest method.

The holder of the Series A-2 Preferred Stock is our majority-owned consolidated subsidiary Forest. Such shares and related embedded derivatives issued to consolidated subsidiaries and their effects on our operations have been eliminated in consolidation.

In connection with the JPM Transactions, Forest issued 35,010 shares of preferred stock in Forest with a face value of ~~$1,000~~$1,000 per share at issuance. The preferred shares were sold to JPM in exchange for cash equal to the face value of such shares. The preferred shares provide for a 9%9% annual dividend, which is payable quarterly. The preferred shares are mandatorily redeemable by the Company at their face value of ~~$1,000~~$1,000 per share on December 29, 2027, or at a ~~0-3%~~0-3% premium decreasing over time based upon the occurrence of certain redemption events prior to December 29, 2027. The redemption events include the occurrence of an ownership change that triggers an IRC § 382 limitation which reduces Forest net operating loss carryforwards to less than ~~$300~~$300 million. The preferred shares are redeemable at any time at the option of Company at a redemption price at face value plus the ~~0-3%~~0-3% premium then in place. The preferred shares rank senior and have preference to the common shares of Forest. The shares are non-voting, do not participate in the earnings of Forest and contain standard protective rights.

As the preferred shares are mandatorily redeemable at a specified date, the security has been classified as a liability in the consolidated balance sheet. The dividends on the preferred stock are included in interest expense in the consolidated statement of operations.

The fair value of each share of Forest Preferred Stock on the issuance date was determined to equal its face value based on the transaction price. Debt issuance costs of ~~$1.2~~$1.2 million is accounted for as a debt discount and accretion of the discount will be charged to interest expense over the ~~7-year~~7-year period to redemption using the effective interest method.

The holder of the Forest Preferred Stock is JPM, who is also the holder of the non-controlling interests in Forest discussed above. See Note 7 – Related Party Transactions.

On January 28, 2018, the Board of Directors of the Company adopted a Tax Benefits Preservation Agreement, between the Company and Computershare Trust Company, N.A., as Rights Agent (the Rights Plan) to replace the Company’s existing Tax Benefits Preservation Agreement, which expired on January 29, 2018, (the Expired Agreement). The Rights Plan is substantially the same as the Expired Agreement. In October 2017, the original Rights Plan was approved by the Company’s stockholders.

The Rights Plan is designed to reduce the possibility that certain changes in ownership could result in limitations on the use of the tax attributes, by restricting the ability of a person or entity from acquiring ownership (including through attribution under the tax law) of ~~4.99%~~4.99% or more of the Company’s common stock and the ability of persons or entities now owning 5%5% or more of the outstanding common shares from acquiring additional common shares.

Pursuant to the terms of the Rights Plan, the Company’s Board of Directors declared a dividend distribution of 1one Preferred Stock Purchase Right (a Tax Right) for each outstanding share of common stock, par value ~~$0.001~~$0.001 per share of the Company (the Common Stock), to stockholders of record as of the close of business on January 29, 2018 (the Record Date). In addition, 1one Tax Right will automatically attach to each share of Common Stock issued between the Record Date and the Distribution Date (as defined in the Rights Plan). Each Tax Right entitles the registered holder thereof to purchase from the Company a unit consisting of one ten-thousandth of a share (a Unit) of Series A Junior Participating Cumulative Preferred Stock, par value ~~$0.001~~$0.001 per share, of the Company at a cash exercise price of ~~$15.00~~$15.00 per Unit (the Exercise Price), subject to adjustment, under the conditions specified in the Rights Plan.

The Tax Rights are not exercisable until the Distribution Date and will expire at the earlier of (a) January 29, 2028; (b) the time when the Tax Rights are redeemed as provided therein; (c) the time when the Rights are exchanged as provided therein; (d) the repeal of Section 382 of the Code if the Independent Directors (as defined in the Rights Plan) determine that the Rights Plan is no longer necessary for the preservation of Tax Benefits (as defined in the Rights Planet); (e) the beginning of the taxable year of the Company to which the Company’s Board of Directors determines that no Tax Benefits may be carried forward, unless previously redeemed or exchanged by the Company.

In November 2013, the Company’s stockholders approved the Amended and Restated 1999 Directors’ Equity Compensation Plan (the Directors’ Plan). Options and awards granted to new or existing Outside Directors (as defined in the Directors’ Plan) under the Directors’ Plan vest ratably over a period of one to three ~~years.~~years. The Directors’ Plan also provides for the acceleration of options upon the dismissal of an Outside Director from the Board of Directors of the Company upon or within 24 months following a change in control of the Company. The exercise price of options granted under the Directors’ Plan is equal to the fair market value of the Company’s common stock on the date of grant. Under the Directors’ Plan, stock option grants have a term of ten ~~years.~~years. As of June 30, ~~2021,~~2022, the Company had ~~a total of 2,000~~no shares outstanding under the Directors’ Plan.

~~In November 2013, the Company’s stockholders approved the Amended and Restated 2006 Stock Incentive Plan (the~~ ~~2006 Plan~~) to provide incentive stock options, non-statutory stock options, restricted stock purchase rights and stock appreciation rights to employees and consultants of the Company and its affiliates. The plan also provides restricted stock bonus, phantom stock units, restricted stock units, performance shares bonus and performance share units. Each share of Company common stock issued pursuant to a stock award issued under this Plan shall reduce the Share Reserve by 1 share; provided, however that for each Full-Value Stock Award, the share reserve shall be reduced by ~~one and one-half~~ shares. The exercise price of options granted under the 2006 Plan approximates the fair market value of the Company’s common stock on the date of grant. Options issued under the 2006 Plan generally expire ten years from the date of grant. Vesting periods are determined by the plan administrator and generally provide for shares to vest ratably over a period of three to four years, with options for new employees generally including a ~~one-year~~ ~~cliff period. As of June 30, 2021, the Company had a total of 214,685 shares outstanding under the 2006 Stock Plan.~~

In June 2016, the Company’s stockholders approved the Great Elm Group, Inc. 2016 Long-Term Incentive Plan (the 2016 Long-Term Incentive Plan) and the Great Elm Group, Inc. 2016 Employee Stock Purchase Plan (the 2016 Employee Stock Purchase Plan). In October 2018, the Company’s stockholders approved amendments to the 2016 Long-Term Incentive Plan. In November 2021, the Company’s stockholders approved an increase to the number of shares available for issuance under the Long-Term Incentive Plan. As of June 30, ~~2021,~~2022, the Company had a total of ~~3,180,603~~3,446,728 shares outstanding under the 2016 Long-Term Incentive Plan and 0no shares were outstanding under the 2016 Employee Stock Purchase Plan.

The following table summarizes the number of common shares available for future issuance under the plans discussed above as of June 30, ~~2021:~~2022:


Shares of Common Stock Available for Future Issuance
Directors' Plan			~~24,166~~26,166
~~2006~~2016 Long-Term Incentive Plan			-1,268,819
~~2016 Long-Term Incentive Plan~~			~~426,288~~
2016 Employee Stock Purchase Plan			944,000
Total			~~1,394,454~~2,238,985

F-44

Non-Employee Director Deferred Compensation Plan

In December 2020, the Company established the Great Elm Group, Inc. Non-Employee Directors Deferred Compensation Plan allowing non-employee directors to defer their cash and/or equity compensation under a ~~non-revokable~~non-revocable election for each calendar year. Such compensation is deferred until the earlier of 3 years from the original grant date of such compensation, termination of service or death, and is payable in common stock shares. As of June 30, ~~2021,~~2022, there were ~~29,875 RSUs~~110,008 restricted stock units and restricted stock awards that had vested but were deferred under the plan.

Restricted Stock Awards ~~(Performance Shares)~~ and Restricted Stock Units

~~During~~In November 2021, the ~~year ended June 30, 2021, there were 0 awards or forfeitures~~Compensation Committee of the Board of Directors (the Compensation Committee) in its discretion determined that an aggregate of 580,023 performance shares previously awarded to certain employees had vested. These restricted stock awards ~~included in the below table and 732,909 remain outstanding as of June 30, 2021. Restricted stock awards~~ granted ~~have~~had both performance and service requirements in connection with the formation of the investment management business. The vesting of these awards iswas subject to a five-year service requirement and an investment management cumulative revenue collection target of ~~$40~~$40 million for the five-year period ended November 3, 2021. ToThe discretionary vesting of shares, as determined by the ~~extent this target is not achieved~~Compensation Committee resulted in ~~full, awards will vest ratably based on the percentage of the target achieved. Additionally, in September 2017, the Company modified the restricted stock awards~~a charge to ~~include a provision for changes in control. This modification did not result in the recognition of additional compensation cost.~~

~~In order to recognize~~stock-based compensation expense ~~over the vesting period, the Company estimates the probability~~ of the performance target being met on an on-going basis. As of June 30, 2021, the Company estimates that approximately 248,529 of the restricted stock awards are probable of vesting under the performance condition. The Company accounts for forfeitures of the restricted stock awards in the period incurred. There were 0 forfeitures$0.6 million during the year ended June 30, ~~2021.~~2022.

~~F-43~~During the year ended June 30, 2022, the Company granted 1,524,896 additional restricted stock awards that have only service requirements.

Restricted stock units granted are subject to service requirements. The Company accounts for forfeitures of the restricted stock units in the period incurred. During the year ended June 30, ~~2020~~2022 the Company granted ~~358,568~~148,139 shares of restricted stock units to employees and ~~directors and 23,104 shares were forfeited related to the resignation of certain~~ directors.

The aggregate grant date fair value of restricted stock granted during the years ended June 30, 2022 and 2021 ~~and 2020 fiscal years~~ was ~~$0.9~~$3.1 million and ~~$1.0~~$0.9 million, respectively. For the years ended June 30, ~~2021~~2022 and ~~2020,~~2021, the total intrinsic value of restricted stock vested was ~~$1.1~~$2.2 million and ~~$0.7~~$1.1 million, respectively.

The activity of the Company’s restricted stock awards and units for the year ended June 30, ~~2021~~2022 was as follows:


Restricted Stock Awards and Restricted Stock Units	Restricted Stock (in thousands)			Weighted Average Grant Date Fair Value		Restricted Stock (in thousands)			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2020		941		$	3.71
Outstanding at June 30, 2021							904		$	3.76
Granted		352			2.60		1,673			1.83
Vested		(389	)		2.60		(1,112	)		3.16
Forfeited		-			-		(153	)		3.87
Outstanding at June 30, 2021		904		$	3.76
Outstanding at June 30, 2022							1,312		$	1.79

Stock Options

The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option pricing model and assumptions noted in the following table. The Company estimates the expected term for new grants based upon actual historical experience. The Company’s expected volatility for the expected term of the option is based upon the historical volatility experienced in the Company’s stock price. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company determines the fair value of non-vested shares based on the Nasdaq closing stock price on the date of grant.

The ranges of assumptions used to value options granted were as follows:


	For the years ended June 30,				For the years ended June 30,
	2021		2020		2022		2021
Expected volatility	63.8% - 66.5%		49.9% - 58.2%		69.8% - 69.8%		63.8% - 66.5%
Expected dividends		-		-		-		-
Expected term (years)	3.25 - 3.25		4.00 - 6.35		3.25 - 3.25		3.25 - 3.25
Risk-free rate	0.23% - 0.40%		1.54% - 1.90%		60.30% - 60.30%		0.23% - 0.40%

F-45

The option activity for the year ended June 30, ~~2021~~2022 was as follows:


Options	Shares (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)		Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2020		2,475	$	3.69		5.51	$	-
Outstanding at June 30, 2021										2,493		$	3.69		4.51	$	-
Options granted		18		3.51						18			2.87
Exercised		-		-						-			-
Forfeited, cancelled or expired		-		-						(377	)		3.67
Outstanding at June 30, 2021		2,493	$	3.69		4.51	$	-
Exercisable at June 30, 2021		1,972	$	3.65		4.19	$	-
Vested and expected to vest as of June 30, 2021		2,493	$	3.69		4.51	$	-
Outstanding at June 30, 2022										2,134		$	3.68		3.34	$	-
Exercisable at June 30, 2022										1,972		$	3.65		3.23	$	-
Vested and expected to vest as of June 30, 2022										2,134		$	3.68		3.34	$	-

~~F-44~~

The weighted average grant date fair value of options, per share, granted during the years ended June 30, 2022 and 2021 was $1.02and ~~2020~~ ~~fiscal years was $1.14 and~~$~~$1.52,~~1.14, respectively. ~~NaN~~No options were exercised during the year ended June 30, 2022 or 2021. ~~During the year ended June 30, 2020, the total intrinsic value of options exercised was approximately $0.0 million.~~

Stock-based compensation expense totaled ~~$1.8~~$2.8 million and ~~$0.5~~$1.8 million for the years ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

As of June 30, ~~2021~~2022 and ~~2020,~~2021, the Company had unrecognized compensation cost related to all unvested share awards and options totaling ~~$1.4~~$2.3 million and ~~$2.2~~$1.4 million, respectively, expected to be recognized as the awards and options vest over the next ~~0.8~~ 1.2years.

During the year ended June 30, 2022, the Company issued compensation to certain employees in the form of GECC common shares to be settled with GECC shares currently held by the Company. The total grant date value of GECC shares awarded for the year ended June 30, 2022 was $0.9 million, of which $0.2 million vested immediately, and the balance will vest annually pro-rata over a three year period. Related compensation expense was $0.4 million for the year ended June 30, 2022.

The Company had loss from continuing operations before provision for income taxes of ~~$7.5~~$15.0 million and ~~$13.3~~$6.8 million for the years ended ~~2021~~June 30, 2022 and ~~2020,~~2021, respectively. There was no foreign activity during these years.

The provision for income taxes includes the following:


	For the years ended June 30,				For the years ended June 30,
(in thousands)	2021		2020		2022			2021
Current	$	1,608	$	8	$	106		$	1,608
Deferred	$	205	$	36	$	(85	)	$	67
Total	$	1,813	$	44	$	21		$	1,675

The Company recognized an income tax expense from continuing operations of ~~$1.8~~$0.02 million and ~~$0.04~~$1.7 million for the ~~year~~years ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. This expense consists solely of state and local income taxes. ~~NaN~~No federal income taxes were incurred for the years ended June 30, 2022 and 2021.

There were no intraperiod allocations during the year ended June 30, ~~2021 and 2020.~~

2022. The Company recognized an income tax benefit with respect to discontinued operations of ~~$0.1~~$0.1 million during the year ended June 30, 2021 related to intraperiod allocations. ~~NaN intraperiod allocations were made in 2020.~~

The following table reconciles the expected corporate federal income tax expense (benefit), computed by multiplying the Company's loss before income taxes by the statutory tax rate of ~~21%~~21% to the total tax expense.


	For the years ended June 30,
(in thousands)	2022			2021
Federal tax benefit at statutory rate	$	(3,153	)	$	(1,437	)
State taxes net of federal impact		(504	)		(289	)
Permanent adjustments		750			32
Change in valuation allowance		(27,527	)		(95,294	)
Provision to return true-up		159			(61	)
Deferred remeasurement		287			(249	)
Net operating loss and credit expirations		30,059			99,071
Stock compensation adjustment		(42	)		(53	)
Other		(8	)		(45	)
Total tax expense	$	21		$	1,675

For the years ended June 30,

(in thousands)

2021

2020

Federal tax benefit at statutory rate

$
(1,578
)

$
(2,747
)
State taxes net of federal impact

(358
)

(459
)
Permanent adjustments

32

33

Change in valuation allowance

(95,038
)

(33,929
)
Provision to return true-up

(61
)

182

Deferred remeasurement

(196
)

-

Net operating loss and credit expirations

99,071

36,724

Stock compensation adjustment

(53
)

156

Other

(6
)

84

Total tax expense

$
1,813

$
44

The tax effect of temporary differences that give rise to significant portions of the Company's deferred tax assets and liabilities are as follows:

In light of the Company's history of cumulative operating losses, the Company recorded a valuation allowance for all of its federal and state deferred tax assets, as it is presently unable to conclude that it is more likely than not that the federal and state deferred tax assets in excess of deferred tax liabilities will be realized. The decrease of ~~$94.2~~$27.6 million in the overall valuation allowance relates primarily to the expiration of federal tax attributes. The state deferred amounts reflected in the above table were calculated using the enacted tax rates. The Company will establish the related federal deferred tax liability for the benefit of the state deduction in conjunction with its analysis of the realizability of its state deferred tax assets. The Company has a net deferred tax liability due to indefinite-lived goodwill that is not amortizable for US GAAP ~~purposes.~~purposes and forecasted future state income due to the reversal of taxable temporary differences in states where the Company has no net operating losses.

As of June 30, ~~2021,~~2022, the Company has net operating loss (NOL) carryforwards for federal and state income tax purposes of approximately ~~$952~~$821 million and ~~$198~~$211 million, respectively. The federal NOL carryforwards generated prior to fiscal year 2018 will expire from ~~2022~~2023 through ~~2037.~~2037. The federal NOL carryforwards generated in fiscal year 2018 or later may be carried forward indefinitely. The California NOL carryforwards of ~~$185 million~~ will expire from 2029 through ~~2037.~~2037. The Massachusetts NOL carryforwards ~~of $13 million~~ will expire from 2031 to ~~2038.~~ 2038.

~~F-46~~

The following table reflects federal NOL carryforwards that will expire beginning in the fiscal year ended June 30, ~~2022~~2023 (in thousands):


Fiscal Year of Expiration	Federal NOL carryforwards		Federal NOL carryforwards
2022	$	143,137
2023		131,077		131,077
2024		60,132		60,132
2025		117,277		117,277
2026 through 2037		486,542		486,542
Indefinite		13,436		26,039
Total	$	951,601	$	821,067

Under Internal Revenue Code Section 382, the utilization of a corporation's NOL carryforwards is limited following a change in ownership (as defined by the Internal Revenue Code) of greater than ~~50%~~50% within a rolling three-year period. If it is determined that prior equity transactions limit the Company's NOL carryforwards, the annual limitation will be determined by multiplying the market value of the Company on the date of the ownership change by the federal long-term tax-exempt rate. Any amount exceeding the annual limitation may be carried forward to future years for the balance of the NOL carryforward period.

During the ~~2021~~years ended June 30, 2022 and ~~2020 fiscal years,~~2021, the total amount of gross unrecognized tax benefit activity was as follows (in thousands):

Balance as of June 30, 2019	$	50,454

Balance as of June 30, 2020				$	44,380
Reductions for tax positions of prior years					(93	)
Lapse of statute of limitations					(8,268	)
Balance as of June 30, 2021					36,019
Addition for tax positions of prior years		-			509
Reductions for tax positions of prior years		(94	)		(71	)
Lapse of statute of limitations		(5,980	)		(4,127	)
Balance as of June 30, 2020		44,380
Addition for tax positions of prior years		-
Reductions for tax positions of prior years		(93	)
Lapse of statute of limitations		(8,268	)
Balance as of June 30, 2021	$	36,019
Balance as of June 30, 2022				$	32,330

During the ~~years~~year ended June 30, 2021, ~~and 2020,~~ the Company’s unrecognized tax benefits decreased by ~~$8.4 and $6.1~~$3.7 million ~~respectively~~primarily due to the expiration of the Company’s historical research and development credits for which an unrecognized tax benefit had been established.

As of June 30, ~~2021~~2022 and ~~2020,~~2021, the Company had approximately ~~$36.0~~$32.3 million and ~~$44.4~~$36.0 million, respectively, of unrecognized tax benefits. The unrecognized tax benefits, if recognized, would impact the effective tax rate by a corresponding amount without considering the impact of the valuation allowance.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits in tax expense on the Company’s consolidated statements of operations. As of June 30, 2022 and 2021, ~~and 2020, 0~~no amount is accrued for interest associated with tax liabilities.

Although timing of the resolution and/or closure on the Company's unrecognized tax benefits is highly uncertain, the Company does not believe it is reasonably possible that the unrecognized tax benefits would materially change in the next 12 months.

The Company files U.S. federal and U.S. state tax returns. Because of NOL carryforwards, substantially all of the Company's tax years, from the 1995 through ~~2021~~2022 fiscal years, remain open to IRS examinations with the exception of the 2010 and 2009 fiscal years for which IRS examinations have been completed. Substantially all of the Company’s tax years, from the 1995 through ~~2021~~2022 fiscal years, remain open to state tax examination.

The Company allocates resources based on 2two business operating segments: durable medical equipment and investment management with general corporate representing unallocated costs and activity to arrive at consolidated operations. Activity not allocated to the segments include, but are not limited to, certain investment and financing activities, professional fees, costs associated with being a public company, acquisition costs and costs associated with executive and corporate management departments, including compensation, benefits, rent and insurance. All operations and assets are based in the United States.

In June 2021, the Company sold our real estate business. Due to its classification as a discontinued operation, our historical segment information has been recast to remove real estate as a reportable segment.

The following tables summarize the results of operations by segment.


	For the year ended June 30, 2021															For the year ended June 30, 2022
(in thousands)	Durable Medical Equipment			Investment Management⁽¹⁾			General Corporate⁽¹⁾			Intercompany Eliminations⁽²⁾			Consolidated Total			Durable Medical Equipment			Investment Management(1)			General Corporate(1)			Intercompany Eliminations(2)			Consolidated Total
Revenue:
Total revenue	$	57,643		$	3,210		$	579		$	(579	)	$	60,853		$	63,458		$	4,516		$	876		$	(876	)	$	67,974
Operating costs and expenses:
Cost of durable medical equipment sold and services		(16,881	)		-			-			-			(16,881	)		(16,795	)		-			-			-			(16,795	)
Cost of durable medical equipment rentals		(6,950	)		-			-			-			(6,950	)		(7,149	)		-			-			-			(7,149	)
Depreciation and amortization		(1,909	)		(473	)		(1	)		-			(2,383	)		(1,737	)		(523	)		(1	)		-			(2,261	)
Stock-based compensation⁽³⁾		-			(757	)		(998	)		-			(1,755	)
Non-cash compensation(3)																	-			(1,872	)		(1,339	)		-			(3,211	)
Transaction costs⁽⁴⁾		(299	)		-			(618	)		-			(917	)		(582	)		-			(499	)		-			(1,081	)
Other selling, general and administrative		(28,969	)		(2,810	)		(4,504	)		579			(35,704	)		(32,987	)		(4,879	)		(4,594	)		876			(41,584	)
Total operating expenses		(55,008	)		(4,040	)		(6,121	)		579			(64,590	)		(59,250	)		(7,274	)		(6,433	)		876			(72,081	)
Other income (expense):
Interest expense		(3,950	)		(101	)		(3,923	)		2,354			(5,620	)		(4,987	)		(161	)		(5,384	)		4,746			(5,786	)
Other income (expense)		(1,174	)		3,654			1,716			(2,354	)		1,842			(3,066	)		(5,633	)		8,322			(4,746	)		(5,123	)
Total other income (expense), net		(5,124	)		3,553			(2,207	)		-			(3,778	)		(8,053	)		(5,794	)		2,938			-			(10,909	)
Total pre-tax income (loss) from continuing operations	$	(2,489	)	$	2,723		$	(7,749	)	$	-		$	(7,515	)	$	(3,845	)	$	(8,552	)	$	(2,619	)	$	-		$	(15,016	)


	For the year ended June 30, 2021
(in thousands)	Durable Medical Equipment			Investment Management(1)			General Corporate(1)			Intercompany Eliminations(2)			Consolidated Total
Revenue:
Total revenue	$	57,643		$	3,210		$	579		$	(579	)	$	60,853
Operating costs and expenses:
Cost of durable medical equipment sold and services		(16,881	)		-			-			-			(16,881	)
Cost of durable medical equipment rentals		(6,950	)		-			-			-			(6,950	)
Depreciation and amortization		(1,909	)		(473	)		(1	)		-			(2,383	)
Non-cash compensation(3)		-			(757	)		(998	)		-			(1,755	)
Transaction costs(4)		(299	)		-			(618	)		-			(917	)
Other selling, general and administrative		(28,969	)		(2,810	)		(4,504	)		579			(35,704	)
Total operating expenses		(55,008	)		(4,040	)		(6,121	)		579			(64,590	)
Other income (expense):
Interest expense		(3,950	)		(101	)		(3,252	)		2,354			(4,949	)
Other income (expense)		(1,174	)		3,654			1,716			(2,354	)		1,842
Total other income (expense), net		(5,124	)		3,553			(1,536	)		-			(3,107	)
Total pre-tax income (loss) from continuing operations	$	(2,489	)	$	2,723		$	(7,078	)	$	-		$	(6,844	)

~~F-48~~F-49

For the year ended June 30, 2020

(in thousands)

Durable Medical Equipment

Investment Management⁽¹⁾

General Corporate⁽¹⁾

Intercompany Eliminations⁽²⁾

Consolidated Total

Revenue:

Total revenue

$
55,662

$
3,332

$
159

$
(159
)

$
58,994

Operating costs and expenses:

Cost of durable medical equipment sold and services

(15,055
)

-

-

-

(15,055
)
Cost of durable medical equipment rentals

(9,105
)

-

-

-

(9,105
)
Depreciation and amortization

(1,878
)

(636
)

(1
)

-

(2,515
)
Stock-based compensation⁽³⁾

-

34

(582
)

-

(548
)
Transaction costs⁽⁴⁾

-

-

(863
)

-

(863
)
Other selling, general and administrative

(26,080
)

(2,138
)

(5,020
)

159

(33,079
)
Total operating expenses

(52,118
)

(2,740
)

(6,466
)

159

(61,165
)
Other income (expense):

Interest expense

(3,655
)

(157
)

(764
)

-

(4,576
)
Other income (expense)

5

(6,617
)

57

-

(6,555
)
Total other income (expense), net

(3,650
)

(6,774
)

(707
)

-

(11,131
)
Total pre-tax income (loss) from continuing operations

$
(106
)

$
(6,182
)

$
(7,014
)

$
-

$
(13,302
)
(1)

Previously reported non-operating activity including dividend income and unrealized gains/losses related to managed investments has been reclassified from General Corporate to Investment Management to conform with current segment organization.

(2)

The Company’s wholly-owned subsidiary, DME Manager, provides advisory services to HC LLC (formerly to DME, Inc) and receives consulting fees for those services. DME Manager is considered part of the general corporate operations while HC LLC is part of the durable medical equipment segment. The corresponding expense to HC LLC and revenue to DME Manager are eliminated in consolidation. Beginning December 29, 2020, DME Manager also provides advisory services to Forest and receives a consulting fee from Forest for those services. Both DME Manager and Forest are part of general corporate operations, and the corresponding revenue and expense are eliminated in consolidation. Additionally, Forest owns Series A-1 Preferred Stock and Series A-2 Preferred Stock of HC LLC. Forest is part of general corporate operations while HC LLC is part of the durable medical equipment segment. The corresponding interest expense to HC LLC and interest income to Forest are eliminated in consolidation.

(3)

Non-cash compensation includes stock-based compensation and compensation in the form of stock in portfolio companies held by the Company. Non-cash compensation attributable to the investment management segment is included in investment management expenses in the consolidated statements of operations. Non-cash compensation attributable to the general corporate segment is included in selling, general and administrative expense in the consolidated statements of operations.

(4)

Transaction costs, which consist of legal and other professional services, are included in selling, general and administrative expense in the consolidated statements of operations.

~~(1)~~

~~(2)~~

~~(3)~~

Stock-based compensation attributable to the investment management segment is included in investment management expenses in the consolidated statements of operations. Stock-based compensation attributable to the general corporate segment is included in selling, general and administrative expense in the consolidated statements of operations.

~~(4)~~

~~Transaction costs, which consist of legal and other professional services, are included in selling, general and administrative expense in the consolidated statements of operations.~~

~~F-49~~

The following tables summarize assets by segments:


	As of June 30, 2022
(in thousands)	Durable Medical Equipment		Investment Management(1)		General Corporate(1)		Total
Fixed assets, net	$	8,025	$	17	$	-	$	8,042
Identifiable intangible assets, net		5,921		13,250		-		19,171
Goodwill		52,463		-		-		52,463
Other assets		11,616		54,520		22,275		88,411
Total	$	78,025	$	67,787	$	22,275	$	168,087

	As of June 30, 2021
(in thousands)	Durable Medical Equipment		Investment Management(1)		General Corporate(1)		Total
Fixed assets, net	$	8,349	$	21	$	2	$	8,372
Identifiable intangible assets, net		7,104		1,824		-		8,928
Goodwill		50,536		-		-		50,536
Other assets		21,150		66,907		5,976		94,033
Total	$	87,139	$	68,752	$	5,978	$	161,869

As of June 30, 2021

(in thousands)

Durable Medical Equipment

Investment Management⁽¹⁾

General Corporate⁽¹⁾

Total

Fixed assets, net

$
8,349

$
21

$
2

$
8,372

Identifiable intangible assets, net

7,104

1,824

-

8,928

Goodwill

50,536

-

-

50,536

Other assets

21,150

66,907

5,976

94,033

Total

$
87,139

$
68,752

$
5,978

$
161,869

As of June 30, 2020

(in thousands)

Durable Medical Equipment

Investment Management⁽¹⁾

General Corporate⁽¹⁾

Total

Fixed assets, net

$
8,854

$
35

$
-

$
8,893

Identifiable intangible assets, net

7,974

2,284

-

10,258

Goodwill

50,010

-

-

50,010

Other assets

19,055

11,359

35,640

66,054

Total

$
85,893

$
13,678

$
35,640

$
135,215

(1)

Managed investment balances have been reclassified from General Corporate to Investment Management to conform with current segment organization.

From time to time, the Company is involved in lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. The Company maintains insurance to mitigate losses related to certain risks. The Company is not a named party in any other pending or threatened litigation that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows.

The following table sets forth a summary of the Company’s unaudited quarterly operating results for each of the eight quarters in the period ended June 30, 2021. The information has been derived from the Company’s unaudited consolidated financial statements that, in management’s opinion, have been prepared on a basis consistent with the accompanying consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation.

Fiscal Year Ended June 30, 2021

Fiscal Year Ended June 30, 2020

Fourth
Quarter

Third
Quarter

Second
Quarter

First
Quarter

Fourth
Quarter

Third
Quarter

Second
Quarter

First
Quarter

Net revenues

$
16,322

$
13,845

$
15,303

$
15,383

$
14,656

$
14,960

$
15,280

$
14,098

Operating costs and expenses

15,893

14,942

17,223

16,532

12,520

16,690

16,265

15,690

Operating loss from continuing
   operations

$
429

$
(1,097
)

$
(1,920
)

$
(1,149
)

$
2,136

$
(1,730
)

$
(985
)

$
(1,592
)
Income (loss) from continuing
   operations

$
(1,390
)

$
(2,991
)

$
(1,017
)

$
(3,930
)

$
4,064

$
(11,985
)

$
(2,087
)

$
(3,338
)
Income (loss) from
   discontinued operations

438

73

71

67

32

67

60

60

Net income (loss) attributable
   to Great Elm Group, Inc.

$
(1,219
)

$
(2,760
)

$
(349
)

$
(3,756
)

$
3,572

$
(11,617
)

$
(1,841
)

$
(3,089
)
Basic income (loss) from
   continuing operations per
   share

$
(0.06
)

$
(0.11
)

$
(0.01
)

$
(0.15
)

$
0.14

$
(0.46
)

$
(0.07
)

$
(0.12
)
Basic income (loss) from
   discontinued operations per
   share

0.02

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Basic income (loss) per share

$
(0.04
)

$
(0.11
)

$
(0.01
)

$
(0.15
)

$
0.14

$
(0.46
)

$
(0.07
)

$
(0.12
)
Diluted income (loss) from
   continuing operations per
   share

$
(0.06
)

$
(0.11
)

$
(0.01
)

$
(0.15
)

$
0.14

$
(0.46
)

$
(0.07
)

$
(0.12
)
Diluted income (loss) from
   discontinued operations per
   share

0.02

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Diluted income (loss) per
   share

$
(0.04
)

$
(0.11
)

$
(0.01
)

$
(0.15
)

$
0.14

$
(0.46
)

$
(0.07
)

$
(0.12
)
Shares used in computing:

   Basic income (loss) per share

25,882

25,757

25,678

25,576

25,469

25,430

25,402

25,373

   Diluted income (loss) per
   share

25,882

25,757

25,678

25,576

25,469

25,430

25,402

25,373

~~On August 31, 2021, through its majority-owned subsidiary, HC LLC, the Company acquired the power mobility assets of MedOne Healthcare LLC (MedOne~~) for cash consideration of $1.5 million plus contingent consideration of up to $1.0 million. Prior to acquisition, MedOne was the largest independent, high service power mobility provider in Arizona. The acquisition adds over 400 new referral sources and expands our existing power mobility business in Arizona.


Delaware	85-3622015
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
800 South Street, Suite 230, Waltham, MA	02453
(Address of principal executive offices)	(Zip Code)


		Page

PART I

Item 1.	Business	2
Item 1A.	Risk Factors	65
Item 1B.	Unresolved Staff Comments	2116
Item 2.	Properties	2116
Item 3.	Legal Proceedings	2117
Item 4.	Mine Safety Disclosures	2117

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2117
Item 6.	[Reserved]	2217
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2217
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	3529
Item 8.	Financial Statements and Supplementary Data	3629
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	3629
Item 9A.	Controls and Procedures	3629
Item 9B.	Other Information	3730
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.	3730

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	3730
Item 11.	Executive Compensation	3730
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	3730
Item 13.	Certain Relationships and Related Transactions, and Director Independence	3830
Item 14.	Principal Accountant Fees and Services	3830

PART IV

Item 15.	Exhibits, Financial Statement Schedules	3830
Item 16	Form 10-K Summary	4133

Exhibit Index		3831
Signatures		4234
Index to Financial Statements		F-1


Exhibit No.		Description
2.1		Agreement and Plan of Merger, dated December 21, 2020, by and among Great Elm Capital Group, Inc., the Registrant and Forest Merger Sub, Inc. (incorporated by reference to the Exhibit 2.1 to the Form 8-K filed on December 29, 2020)

2.2*
2.2*		Purchase Agreement by and among Great Elm FM Acquisition, Inc. and Monomoy Properties Fort Myers FL, LLC, dated June 23, 2021 (incorporated by reference to the Exhibit 2.1 to the Form 8-K filed on June 24, 2021)

3.1		Certificate of Incorporation of the Registrant, dated October 23, 2020 (incorporated by reference to the Exhibit 3.1 to the Form 8-K filed on December 29, 2020)

3.2		Bylaws of the Registrant, dated October 23, 2020 (incorporated by reference to the Exhibit 3.2 to the Form 8-K filed on December 29, 2020)

4.1		Form of the Registrant’s Common Stock Certificate (incorporated by reference to the Exhibit 4.1 to the Form 8-K filed on December 29, 2020)


~~Exhibit No.~~		~~Description~~
4.2		Certificate of Designation of Series A Junior Participating Cumulative Preferred Stock of the Registrant, dated December 23, 2020 (incorporated by reference to the Exhibit 4.2 to the Form 8-K filed on December 29, 2020)

4.3		Stockholders’ Rights Agreement, dated December 29, 2020, by and between the Registrant and Computershare Trust Company, N.A. (incorporated by reference to the Exhibit 4.3 to the Form 8-K filed on December 29, 2020)

4.4		Form of 5.0% Convertible Senior PIK Notes due 2030 (incorporated by reference to the Exhibit 4.4 to the Form 8-K filed on December 29, 2020)

4.5		Form of Amendment to 5.0% Convertible Senior PIK Notes due 2030 (incorporated by reference to the Exhibit 4.1 to the Form 10-Q filed on May 14, 2021)

4.6		Registration Rights Agreement, dated as of February 26, 2020, by and between Great Elm Capital Group, Inc. and certain accredited investors party thereto (incorporated by reference to the Exhibit 4.5 to the Form 8-K filed on December 29, 2020)

4.7		Description of Securities

4.8		Base Indenture, dated as of June 9, 2022, by and between Great Elm Group, Inc. and American Stock and Transfer & Trust Company, LLC, as Trustee (incorporated by reference to the Exhibit ~~4.6~~4.1 to the Form 8-K filed on ~~December 29, 2020)~~June 9, 2022)

~~10.1+~~ 4.9		First Supplemental Indenture, dated as of June 9, 2022, by and between Great Elm Group, Inc. and American Stock and Transfer & Trust Company, LLC, as Trustee (incorporated by reference to the Exhibit 4.2 to the Form 8-K filed on June 9, 2022)

4.10		Form of 7.25% Note Due 2027 (incorporated by reference to the Exhibit 4.3 to the Form 8-K filed on June 9, 2022)

10.1+		Offer Letter, dated December 29, 2020 between Peter A. Reed and the Registrant (incorporated by reference to the Exhibit 10.1 to the Form 8-K filed on December 29, 2020)

10.2+		Offer Letter, dated December 29, 2020 between Adam Kleinman and the Registrant (incorporated by reference to the Exhibit 10.2 to the Form 8-K filed on December 29, 2020)

10.3+		Offer Letter, dated December 29, 2020 between Brent Pearson and the Registrant (incorporated by reference to the Exhibit 10.3 to the Form 8-K filed on December 29, 2020)

10.4+		Compensation Plan Agreement, dated December 29, 2020, by and between Great Elm Capital Group, Inc. and the Registrant (incorporated by reference to the Exhibit 10.4 to the Form 8-K filed on December 29, 2020)



10.5+		Form of Director and Officer Indemnification Agreement (incorporated by reference to the Exhibit 10.5 to the Form 8-K filed on December 29, 2020)

10.6+		Form of Performance Stock Award (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on November 9, 2016 by Great Elm Capital Group, Inc. (File No. 001-16073))

10.7+		Form of US Stock Option Agreement (incorporated by reference to Exhibit 10.3 to the Form 10-Q filed on May 12, 2004 by Great Elm Capital Group, Inc. (File No. 001-16073))

10.8+		Second Amended and Restated 2006 Stock Incentive Plan, amended and restated effective November 12, 2013 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on February 7, 2014 by Great Elm Capital Group, Inc. (File No. 001-16073))

10.9+		Form of 2006 Stock Incentive Plan Restricted Stock Unit Grant Notice (incorporated by reference to Exhibit 10.9 to the Form 10-Q filed on February 8, 2012 by Great Elm Capital Group, Inc. (File No. 001-16073))

10.10+		Second Amended and Restated 1999 Directors’ Equity Compensation Plan, amended and restated effective September 13, 2013 and November 12, 2013 (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on February 7, 2014 by Great Elm Capital Group, Inc. (File No. 001-16073))

10.11+		Form of Notice of Stock Option Grant and Form of Stock Option Agreement under the Registrant’s Amended and Restated 1999 Directors’ Equity Compensation Plan (incorporated by reference to Exhibit 99.2 to the Form S-8 filed on December 4, 2009 by Great Elm Capital Group, Inc. (Registration Statement No. 333-163480))


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐


	For the years ended June 30,
	2022			Percent Change	2021
Revenue:
Total revenue	$	67,974		12%	$	60,853
Operating costs and expenses:
Cost of goods sold		(16,795	)	(1)%		(16,881	)
Cost of rentals		(7,149	)	3%		(6,950	)
Other selling, general and administrative		(45,876	)	20%		(38,376	)
Depreciation and amortization		(2,261	)	(5)%		(2,383	)
Total operating expenses		(72,081	)			(64,590	)
Operating loss		(4,107	)			(3,737	)
Other income (expense):
Interest expense		(5,786	)	17%		(4,949	)
Other income (expense)		(5,123	)	NM		1,842
Total other expense, net		(10,909	)			(3,107	)
Total pre-tax loss from continuing operations	$	(15,016	)		$	(6,844	)


~~Exhibit No.~~		~~Description~~
10.12+		Form of Notice of Restricted Stock Bonus Grant and Form of Restricted Stock Bonus Agreement under the Registrant’s Amended and Restated 1999 Directors’ Equity Compensation Plan (incorporated by reference to Exhibit 99.3 to the Form S-8 filed on December 4, 2009 by Great Elm Capital Group, Inc. (Registration Statement No. 333-163480))

10.13+		Great Elm Group, Inc. Amended and Restated 2016 Long-Term Incentive Compensation Plan (As Amended, Effective November 17, 2021) (incorporated by reference to ~~Annex A~~Exhibit 10.1 to the ~~Proxy Statement~~Form 8-K of Great Elm Group, Inc. filed on ~~September 20, 2018 by Great Elm Capital Group, Inc. (File No. 001-16073))~~November 17, 2021)

10.14+		2016 Employee Stock Purchase Plan (incorporated by reference to Annex E to the Proxy Statement filed on May 25, 2016 by Great Elm Capital Group, Inc. (File No. 001-16073))

10.15+
~~10.15+~~		Form of Amended and Restated Notice of Performance Stock Award (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on September 20, 2017 by Great Elm Capital Group, Inc. (File No. 001-16073))
~~10.16+~~
10.16+		Form of Restricted Stock Unit Award (Directors) under the Registrant’s Amended and Restated 2016 Long-Term Incentive Compensation Plan (incorporated by reference to Exhibit 10.16 to the Form 10-K of Great Elm Group, Inc. filed on September 21, 2021)

10.17+		Form of Restricted Stock Unit Award (Employees) under the Registrant’s Amended and Restated 2016 Long-Term Incentive Compensation Plan (incorporated by reference to Exhibit 10.17 to the Form 10-K of Great Elm Group, Inc. filed on September 21, 2021)

10.18+		Amended and Restated Great Elm Capital Management Performance Bonus Plan, dated February 6, 2019, (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 8, 2019 by Great Elm Capital Group, Inc. (File No. 001-16073))

10.19		Transaction Agreement, dated March 10, 2021, by and among the Registrant, MAST Capital Management, LLC and David Steinberg (incorporated by reference to the Exhibit 10.1 to the Form 10-Q filed on May 14, 2021)

10.20		Investment Management Agreement, dated as of September 27, 2016, by and between Great Elm Capital Corp. and Great Elm Capital Management, Inc. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on November 7, 2016 by Great Elm Capital Corp. (File No. 814-01211))

10.21		Administration Agreement, dated as of September 27, 2016, by and between Great Elm Capital Corp. and Great Elm Capital Management, Inc. (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 7, 2016 by Great Elm Capital Corp. (File No. 814-01211))

10.22		Profit Sharing Agreement, dated as of November 3, 2016, by and between Great Elm Capital Management, Inc. and Great Elm Capital GP, LLC (formerly GECC GP Corp.) (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on November 9, 2016)


10.23		Promissory Note, by and between Great Elm Capital Management, Inc. and Imperial Capital Asset Management, LLC, dated May 4, 2022 (incorporated by reference to Exhibit 10.1 to the Form 8-K of Great Elm Group, Inc. filed on May 5, 2022)
~~14.1~~
14.1		Code of Conduct of Great Elm Group, Inc. (incorporated by reference to the Exhibit 14.1 to the Form 8-K filed on December 29, 2020)

21.1		Subsidiaries of the Registrant.

23.1		Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm

23.2		Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of the ~~Principal~~Chief Executive Officer ~~pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~


~~Exhibit No.~~		~~Description~~
~~32.2~~		~~Certifications of the Principal~~and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.1		Audited financial statements of Great Elm Capital Corp. (incorporated by reference to the annual report on Form ~~10-K~~10-K/A filed on ~~March 16, 2021~~April 19, 2022 by Great Elm Capital Corp. (File No. 814-01211))

101		Materials from the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021, formatted in inline Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of ~~Stockholders��~~Stockholders’ Equity and Contingently Redeemable Non-Controlling Interest, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related Notes to the Condensed Consolidated Financial Statements, tagged in detail (furnished herewith).

104		The cover page from the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021, formatted in inline XBRL (included as Exhibit 101).


	GREAT ELM GROUP, INC.

	By:		/s/ Peter A. Reed
	Name:		Peter A. Reed
	Title:		Chief Executive Officer


Signature		Title

/s/ Peter A. Reed		Chief Executive Officer ~~and Director~~
Peter A. Reed		(Principal Executive Officer)

/s/ Brent J. Pearson		Chief Financial Officer & Chief Accounting Officer
Brent J. Pearson		(Principal Financial and Accounting Officer)

/s/ Matthew A. Drapkin		Director
Matthew A. Drapkin

/s/ Thomas S. Harbin III		Director
Thomas S. Harbin III

/s/ James H. Hugar		Director
James H. Hugar

/s/ David Matter		Director
David Matter

/s/ James P. Parmelee		Director
James P. Parmelee

/s/ Jason W. Reese		Director
Jason W. Reese

/s/ Eric J. Scheyer		Director
Eric J. Scheyer

/s/ Jeffrey S. Serota		Director
Jeffrey S. Serota


Report of Independent Registered Public Accounting Firm (PCAOB ID: 248)		F-2
Consolidated Balance Sheets at June 30, ~~2021~~2022 and ~~2020~~2021		F-4
Consolidated Statements of Operations for the years ended June 30, ~~2021~~2022 and ~~2020~~2021		F-5
Consolidated Statements of Stockholders’ Equity and Contingently Redeemable Non-Controlling Interest for the years ended June 30, ~~2021~~2022 and ~~2020~~2021		F-6
Consolidated Statements of Cash Flows ~~years~~ for the years ended June 30, ~~2021~~2022 and ~~2020~~2021		F-7
Notes to the Consolidated Financial Statements		F-9

	For the years ended June 30,
	2021	2020⁽¹⁾
Government Payor	37%	33%
Third-party Payor	12%	11%

	As of As of June 30,
(in thousands)	2021		2020
Dividends receivable	$	554	$	170
Investment management revenues receivable		936		746
Receivable for reimbursable expenses paid		297		158

Estimated Future Amortization Expense (in thousands):
For the year ending June 30, 2022	$	1,571
For the year ending June 30, 2023		1,468
For the year ending June 30, 2024		1,269
For the year ending June 30, 2025		1,159
For the year ending June 30, 2026		1,097
Thereafter		2,364
Total		8,928


(in thousands)
For the year ending June 30, 2022		2,468
For the year ending June 30, 2023		1,774			1,887
For the year ending June 30, 2024		1,296			1,646
For the year ending June 30, 2025		766			691
For the year ending June 30, 2026		499			622
For the year ending June 30, 2027					143
Thereafter		106			19
Total lease payments	$	6,909		$	5,008
Imputed interest		(1,393	)		(1,074	)
Total lease liabilities	$	5,516		$	3,934

	For the years ended June 30,
(in thousands)	2021⁽¹⁾		2020
Principal payments	$	-	$	76
Interest expense		73		167

	Fiscal Year Ended June 30, 2021												Fiscal Year Ended June 30, 2020
	Fourth Quarter			Third Quarter			Second Quarter			First Quarter			Fourth Quarter		Third Quarter			Second Quarter			First Quarter
Net revenues	$	16,322		$	13,845		$	15,303		$	15,383		$	14,656	$	14,960		$	15,280		$	14,098
Operating costs and expenses		15,893			14,942			17,223			16,532			12,520		16,690			16,265			15,690
Operating loss from continuing operations	$	429		$	(1,097	)	$	(1,920	)	$	(1,149	)	$	2,136	$	(1,730	)	$	(985	)	$	(1,592	)
Income (loss) from continuing operations	$	(1,390	)	$	(2,991	)	$	(1,017	)	$	(3,930	)	$	4,064	$	(11,985	)	$	(2,087	)	$	(3,338	)
Income (loss) from discontinued operations		438			73			71			67			32		67			60			60
Net income (loss) attributable to Great Elm Group, Inc.	$	(1,219	)	$	(2,760	)	$	(349	)	$	(3,756	)	$	3,572	$	(11,617	)	$	(1,841	)	$	(3,089	)
Basic income (loss) from continuing operations per share	$	(0.06	)	$	(0.11	)	$	(0.01	)	$	(0.15	)	$	0.14	$	(0.46	)	$	(0.07	)	$	(0.12	)
Basic income (loss) from discontinued operations per share		0.02			0.00			0.00			0.00			0.00		0.00			0.00			0.00
Basic income (loss) per share	$	(0.04	)	$	(0.11	)	$	(0.01	)	$	(0.15	)	$	0.14	$	(0.46	)	$	(0.07	)	$	(0.12	)
Diluted income (loss) from continuing operations per share	$	(0.06	)	$	(0.11	)	$	(0.01	)	$	(0.15	)	$	0.14	$	(0.46	)	$	(0.07	)	$	(0.12	)
Diluted income (loss) from discontinued operations per share		0.02			0.00			0.00			0.00			0.00		0.00			0.00			0.00
Diluted income (loss) per share	$	(0.04	)	$	(0.11	)	$	(0.01	)	$	(0.15	)	$	0.14	$	(0.46	)	$	(0.07	)	$	(0.12	)
Shares used in computing:
Basic income (loss) per share		25,882			25,757			25,678			25,576			25,469		25,430			25,402			25,373
Diluted income (loss) per share		25,882			25,757			25,678			25,576			25,469		25,430			25,402			25,373