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Item 2. Management’s Discussion and Analysis

2025-11-12 compared with 2025-05-07 · 132 added, 52 removed, 28 unchanged (87% of the section changed)

1 unchanged sentence

GEG is a publicly-traded alternative asset management company focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies.

GEG and its subsidiaries currently manage GECC, a publicly-traded business development company, and Monomoy UpREIT, an industrial-focused real estate investment trust, in addition to other investment vehicles.

The combined assets under management of these entities at March 31, 2025 was approximately $768 million.

GEG and its subsidiaries currently manage GECC, a publicly-traded BDC, and Monomoy UpREIT, an Industrial Outdoor Storage ( IOS ) focused real estate investment trust, in addition to other investment vehicles.

The combined assets under management of these entities at September 30, 2025 was approximately $792 million.

GEG continues to explore other investment management opportunities, as well as opportunities in other areas that it believes provide attractive risk-adjusted returns on invested capital.

As of the date of this report, GEG had no unfunded binding commitments to make additional investments.

Critical Accounting Policies

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 of America.

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.

During the nine months ended March 31, 2025 we did not make material changes in our critical accounting policies or underlying assumptions as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 as it relates to normal and recurring transactions.

Change in Segments

During the first quarter of fiscal 2026, the Company realigned the information that the Chief Operating Decision Maker ( CODM ) regularly reviews to evaluate performance for operating decision-making purposes, including performance assessment and allocation of resources.

As a result of this change in segment reporting, the Company retrospectively recast prior period results, by segment, to conform to the current period presentation.

This structure includes two reportable segments:

Alternative Credit and Real Estate.

The structure is based on the Company’s various investment strategies.

As a result of the change noted above, effective for the quarter ended September 30, 2025, the Company began reporting the following business segments:

• Alternative Credit - focused on income generation and capital preservation through investment in debt and income-generating securities, direct lending, CLOs, and specialty finance businesses including Factoring, Asset Based Lending and Healthcare

• Real Estate - full service, end-to-end real estate platform combining investment expertise and turnkey execution capabilities for IOS sector

The Company has a corporate office that is included in “Corporate & Other”.

The corporate office supports the segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, legal, compliance and human resources.

Results of Operations

The following table provides the results of our consolidated operations:

For the three months ended March 31,

For the nine months ended March 31,

For the three months ended September 30,

(in thousands)

Percent Change

Cost of Revenues

Operating costs and expenses:

Investment management expenses, excluding non-cash compensation

Non-cash compensation

Other selling, general and administrative

Compensation and benefits

Selling, general and administrative

Depreciation and amortization

Expenses of Consolidated Funds

Total operating costs and expenses

Operating loss

Other income (expense):

Other (expense) income:

Interest expense

Other income (expense), net

Total other income (expense), net

(Loss) income before income taxes from continuing operations

Revenues for the three months ended March 31, 2025 increased $0.4 million as compared to the three months ended March 31, 2024 primarily due to an additional $0.3 million of management fees recognized due to increased assets under management at GECC.

Additionally, $0.4 million of project management fees were recognized for the three months ended March 31, 2025, related to our construction services business which we acquired in the current period.

These increases were partially offset by a reduction in Incentive Fee revenue of $0.5 million compared to the prior year period due to restrictions on the underlying fund's ability to pay such fees until certain metrics are met.

Revenues for the nine months ended March 31, 2025 increased $1.8 million as compared to the nine months ended March 31, 2024 primarily due to the recognition of $1.2 million of real estate property sales earned in the current year whereas there were no corresponding real estate property sales in the prior year.

An additional $0.9 million of management fees were also recognized in the nine months ended March 31, 2025 compared to the prior year period due to increased assets under management at GECC.

Furthermore, $0.5 million of project management fees were recognized for the nine months ended March 31, 2025 related to our construction services business which was not around in the corresponding prior year period.

These increases were offset by a reduction in Incentive Fees of $1.1 million compared to the prior year period.

Other (expense) income, net

Total other (expense) income, net

(Loss) income before income taxes

Income tax expense

Net (loss) income

*NM - not meaningful

Revenues and cost of revenues for the three months ended September 30, 2025 increased $6.8 million and $6.1 million, respectively, as compared to the three months ended September 30, 2024, primarily due to an increase in Real Estate property sales revenues and related cost of revenues due to a September 2025 property sale.

The increase in revenues were partially offset by a reduction in Incentive fees of $0.9 million compared to the prior year period.

Operating Costs and Expenses

Investment management expenses for the three and nine months ended March 31, 2025 increased $1.2 million and $1.6 million, respectively, as compared to the corresponding prior year periods primarily driven by increased personnel due to business growth.

Additionally, a $0.5 million reduction in expense related to contingent consideration was recognized in the prior year periods which is not applicable in the current year period.

Other selling, general and administrative expenses for the three and nine months ended March 31, 2025 decreased $0.3 million and $0.7 million, respectively, as compared to the corresponding prior year periods, due to a reduction in professional fees and other expenses.

Compensation and benefits expenses for the three months ended September 30, 2025 increased $1.7 million as compared to the corresponding prior year period primarily driven by increased personnel due to the Greenfield acquisition.

Selling, general and administrative expenses for the three months ended September 30, 2025 increased $0.7 million as compared to the corresponding prior year period, which was mainly attributable to a an increase in selling, general and administrative expenses due to the acquisition of Greenfield.

Depreciation and amortization increased $0.1 million, as compared to the prior year period, primarily due to an increase in depreciation and amortization due to the Greenfield Acquisition and depreciation expense on a building.

Other Income (Expense)

Other income (expense), net includes dividend and interest income and net realized and unrealized gains and losses.

For the three and nine months ended March 31, 2025, interest income decreased $0.4 million and $1.3 million, respectively, as compared to the corresponding prior year periods, due to changes in the investment portfolio shifting away from interest earning marketable securities into other strategic private investments.

For the three and nine months ended March 31, 2025, dividend income decreased $0.6 million and $0.4 million, respectively, as compared to the corresponding prior year periods, primarily due to a one-time redemption on investment in the corresponding prior year period.

Net realized and unrealized gains and losses generally consist of unrealized mark-to-market adjustments on investments and the gain or loss realized on the sale of investments.

For the three months ended March 31, 2025, realized and unrealized loss decreased by $0.3 million.

Current period losses were primarily driven by a decrease in our investments in GECC of $1.2 million.

For the nine months ended March 31, 2025, realized and unrealized gain increased by $2.0 million as compared to the corresponding prior year period.

These gains were primarily driven by $3.1 million of gains related to the special purpose vehicle which had a significant loss in the corresponding prior year period.

Additionally, unrealized gains of $1.1 million were recorded in the nine months ended March 31, 2025 on an investment in a special purpose vehicle which was not held in the prior year.

These were partially offset by a decrease in our investment in GECC compared to the prior year period due to additional shares vesting in the current year and a decrease in share price.

For the three months ended September 30, 2025, net realized and unrealized gains decreased $6.6 million as compared to the corresponding prior year period due to significant unrealized losses recorded in the current year period, primarily driven by a notable unrealized loss being recognized on one of our investments in a private fund in the current year period.

For the three months ended September 30, 2025, interest income decreased $0.3 million as compared to the corresponding prior year period, due to changes in the investment portfolio shifting away from interest earning marketable securities into other strategic private investments.

For the three months ended September 30, 2025, dividend income remained flat as compared to the corresponding prior year period.

Segment Analysis

We conduct our operations through two business segments:

Alternative Credit and Real Estate.

Effective for the quarter ended September 30, 2025, we began reporting the following business segments.

• Real Estate - full service, end-to-end real estate platform combining investment expertise and turnkey execution capabilities for IOS sector

The Company has a corporate office that is included in “Corporate & Other”.

The primary measure used by CODM in measuring performance and allocating resources to the segments is net income, as reported on our condensed consolidated statements of operations, predominantly in the annual budget and forecasting process.

The CODM considers budget-to-actual variances on a quarterly basis when making decisions about internal operations, such as staffing and related compensation, and planning for future investments.

Alternative Credit Segment

The following table provides the results of our Alternative Credit segment:

For the three months ended September 30,

(in thousands)

Percent Change

Operating costs and expenses:

Compensation and benefits

Selling, general and administrative

Depreciation and amortization

Total operating costs and expenses

Operating (loss) income

Other income:

Interest expense

Other income, net

Total other income, net

(Loss) income before income taxes

Income tax expense

Net (loss) income

Alternative Credit Revenue

Alternative Credit Revenues for the three months ended September 30, 2025 decreased $0.9 million as compared to the three months ended September 30, 2024 due to a reduction in Incentive Fee revenue compared to the prior year period as fees cannot be received yet from the underlying fund until certain performance metrics are met.

Alternative Credit Expenses

Alternative Credit compensation and benefits expense increased $0.2 million for the three months ended September 30, 2025 as compared to the corresponding prior year period primarily driven by an increase in non-cash compensation due to a larger amount of shares awarded and vested in the current period compared to the prior year period.

Alternative Credit segment selling, general and administrative expenses increased $0.1 million as compared to the three months ended September 30, 2024 primarily due to an increase in legal and recruiting expenses.

Real Estate Segment

The following table provides the results of our Real Estate segment:

For the three months ended September 30,

(in thousands)

Percent Change

Cost of Revenues

Operating costs and expenses:

Compensation and benefits

Selling, general and administrative

Depreciation and amortization

Total operating costs and expenses

Operating loss

Other income:

Interest expense

Other income, net

Total other income, net

Loss before income taxes

Income tax expense

*NM - not meaningful

Real Estate Revenue

Real Estate revenues for the three months ended September 30, 2025 increased $7.7 million as compared to the three months ended September 30, 2024 primarily due to a $7.4 million sale of real estate property in the current year.

Similarly, related costs of revenues increased by $6.1 million compared to the corresponding prior year period due to this sale.

Additionally, there was a $0.7 million increase in revenue related to our construction services business compared to the corresponding prior year period given the Company had not yet acquired this business in the prior year period.

Real Estate Expenses

Real Estate segment compensation and benefits expenses for the three months ended September 30, 2025 increased $1.6 million as compared to the corresponding prior year period driven by increased personnel expense due to the Greenfield acquisition.

Real Estate segment selling, general and administrative expenses increased $0.5 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily due to increased legal, insurance and other expenses due to increased activity at these entities and the Greenfield acquisition.

Depreciation and amortization increased $0.1 million, as compared to the prior year period due to amortization of intangible assets related to the Greenfield acquisition, along with depreciation related to a building owned which was not complete in the prior year period.

Corporate & Other

The following table provides the results of Corporate & Other:

For the three months ended September 30,

(in thousands)

Percent Change

Operating costs and expenses:

Compensation and benefits

Selling, general and administrative

Expenses of Consolidated Funds

Total operating costs and expenses

Operating loss

Other income (expense):

Interest expense

Other (expense) income, net

Total other (expense) income, net

(Loss) income before income taxes

Income tax expense

Net (loss) income

*NM - not meaningful

Corporate & Other Operating Costs and Expenses

Compensation and benefits expenses related to Corporate & Other for the three months ended September 30, 2025 decreased $0.1 million as compared to the corresponding prior year period due to a decrease in personnel costs allocated to the Corporate & Other.

Corporate & Other Expenses

For the three months ended September 30, 2025, net realized and unrealized gains decreased $6.6 million as compared to the corresponding prior year period due to a significant unrealized loss on one of our investments in a private fund.

This was partially offset by a significant realized gain recorded in the private fund in the current year period.

Additionally, in the corresponding prior year period $3.5 million of unrealized gains were recorded due to a change in valuation technique for our special purpose vehicles.

In the current year period, an unrealized loss of $0.4 million was recorded on these entities.

Liquidity and Capital Resources

Cash used in operating activities of our continuing operations for the nine months ended March 31, 2025 was $11.2 million.

The adjustments to reconcile our net loss from continuing operations of $0.2 million to net cash used in operating activities included add-backs for various non-cash charges, such as $1.5 million of stock-based compensation expense, $1.6 million of non-cash interest and amortization of capitalized issuance costs, $0.3 million realized loss on investments and $0.9 million of depreciation and amortization, which was offset by a deduction of $4.1 million of unrealized gain on our investments, and the net negative change in our operating assets and liabilities of $12.5 million, including the impact of changes related to consolidated funds.

Cash used in operating activities of our continuing operations for the nine months ended March 31, 2024 were $18.5 million.

The adjustments to reconcile our net loss from continuing operations of $0.4 million to net cash used in operating activities included add-backs for various non-cash charges, such as $1.8 million of stock-based compensation expense, $1.7 million of non-cash interest and amortization of capitalized issuance costs, and $0.8 million of depreciation and amortization, which was offset by deduction of $1.8 million of unrealized gain on our investments, and the net negative change in our operating assets and liabilities of $11.6 million, including the impact of changes related to consolidated funds.

Cash used in investing activities of our continuing operations for the nine months ended March 31, 2025 were $0.8 million, which includes related loan receivable of $7.5 million, purchases of investments in held-to-maturity securities of $7.4 million, investments in portfolio funds of $4.5 million and acquisition of business of $2.5 million, offset by proceeds from settlement of held-to-maturity investments of $17.5 million and redemption of investments of $3.9 million.

Cash used in investing activities of our continuing operations for the nine months ended March 31, 2024 were $3.7 million, which includes investment purchases of $59.8 million partially offset by the proceeds from sale of investments of $56.8 million.

Cash flows used in investing activities of our discontinued operations for the nine months ended March 31, 2024 were $0.9 million, which represents the payments made to the buyer and former minority interest holders of our durable medical equipment business in connection with working capital adjustment and escrow payments.

Cash used in financing activities of our continuing operations for the nine months ended March 31, 2025 were $6.2 million primarily due to stock repurchases.

Cash provided by financing activities of our continuing operations for the nine months ended March 31, 2024 were $7.1 million related to capital activity of Consolidated Funds.

Net cash from operating activities increased $9.6 million, from net cash used of $5.8 million for the three months ended September 30, 2024 to net cash provided of $3.8 million for the three months ended September 30, 2025, driven by proceeds from sale of real estate in September 2025 and changes in operating assets and liabilities period-over-period.

Net cash from investing activities increased $6.9 million, from net cash provided of $2.5 million for the three months ended September 30, 2024 to net cash provided of $9.3 million for the three months ended September 30, 2025, driven by settlement of related party loan receivable and net sales of investments for the three months ended September 30, 2025.

Net cash from financing activities increased $11.9 million, from net cash used of $2.2 million for the three months ended September 30, 2024 to net cash provided of $9.7 million for the three months ended September 30, 2025, driven by proceeds from issuance of common stock and lower stock repurchases during the three months ended September 30, 2025.

Financial Condition

As of March 31, 2025, we had an unrestricted cash balance of $31.5 million, as compared to an unrestricted cash balance of $48.1 million as of June 30, 2024.

We also held 1,438,079 shares of GECC common stock with an estimated fair value of $14.7 million as of March 31, 2025, as compared to 1,518,162 shares of GECC common stock with an estimated fair value of $16.2 million as of June 30, 2024.

As of September 30, 2025, we had an unrestricted cash balance of $53.5 million, as compared to an unrestricted cash balance of $30.6 million as of June 30, 2025.

We also held 1,358,276 shares of GECC common stock with an estimated fair value of $13.6 million as of September 30, 2025, as compared to 1,438,079 shares of GECC common stock with an estimated fair value of $15.3 million as of June 30, 2025.

We believe we have sufficient liquidity available to meet our short-term and long-term obligations.

As of March 31, 2025, the Company had $26.9 million in outstanding aggregate principal amount of the GEGGL Notes.

Interest on the GEGGL Notes is paid quarterly.

As of September 30, 2025, the Company had $26.9 million in outstanding aggregate principal amount of 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 in the event that our net consolidated debt to equity ratio is, or would be on a pro forma basis, greater than 2 to 1.

In addition, if our net consolidated debt to equity ratio is greater than 2 to 1 at the end of any calendar quarter, we must retain no less than 10% of our excess cash flow as cash and cash equivalents until such time as our net consolidated debt to equity ratio is less than 2 to 1 at the end of a calendar quarter.

As of March 31, 2025, the Company had $36.4 million principal balance in convertible notes outstanding (including cumulative interest paid in-kind).

The convertible notes are held by a consortium of investors, including related parties.

The convertible notes accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, in cash or in kind at the option of the Company.

As of September 30, 2025, the Company had $35.1 million principal balance in outstanding Convertible Notes (including cumulative interest paid in-kind) held by a consortium of investors, including related parties, that accrue interest at 5.0% per annum, payable semiannually in arrears on June 30 and December 31, in cash or in-kind at the option of the Company.

The Convertible Notes 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.

1 unchanged sentence

To date, all interest on these instruments has been paid in-kind.

Critical Accounting Policies

During the three months ended September 30, 2025 we did not make material changes in our critical accounting policies or underlying assumptions as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 as it relates to normal and recurring transactions.

Critical accounting policies and estimates are those that require management’s most difficult, subjective or complex judgments and would therefore be deemed the most critical to an understanding of our results of operations and financial condition.

Recent Accounting Developments

See discussion of Recent Accounting Developments in Note 2 of the accompanying Condensed Consolidated Financial Statements.

Quantitative and Qualitati ve Disclosures About Market Risk.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis