What changed in this filing

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Item 1. Financial Statements

2021-05-14 compared with 2021-02-16 · 235 added, 166 removed, 1019 unchanged (28% of the section changed)

3 unchanged sentences

Dollar amounts in thousands (except per share data)

December 31, 2020

March 31, 2021

June 30, 2020

6 unchanged sentences

Prepaid and other current assets

Assets of consolidated fund

Assets of consolidated funds

Investments, at fair value (cost $ 25,661 )

15 unchanged sentences

Current portion of equipment financing debt

Liabilities of consolidated fund

Accrued expenses and other liabilities

Liabilities of consolidated funds

Due to broker and other liabilities

Total current liabilities

13 unchanged sentences

Common stock, $ 0.001 par value;

350,000,000 shares authorized and 26,423,677 shares issued and 25,690,768 outstanding at December 31, 2020;

350,000,000 shares authorized and 26,495,976 shares issued and 25,837,000 outstanding at March 31, 2021;

and 26,217,380 shares issued and 25,529,534 outstanding at June 30, 2020

10 unchanged sentences

Dollar amounts in thousands (except per share data)

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

Durable medical equipment sales and services revenue

11 unchanged sentences

Selling, general and administrative

Expenses of consolidated fund

Expenses of consolidated funds

Total operating costs and expenses

1 unchanged sentence

Dividends and interest income

Unrealized gain (loss) on investment in GECC

Net unrealized gain on investments of consolidated fund

Net realized and unrealized loss on investment in GECC

Net realized and unrealized gain on investments of consolidated funds

Interest expense

8 unchanged sentences

1 Includes depreciation expense of:

2 Net of CARES Act Stimulus of:

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

16 unchanged sentences

BALANCE, December 31, 2020

Issuance of common stock related to vesting of restricted stock

Non-cash distributions to non-controlling interest holders of DME, Inc.

Deemed capital contribution related to issuance of convertible notes

Repurchase of interests in subsidiary

Issuance of LP interests in Consolidated Fund

Stock-based compensation

BALANCE, March 31, 2021

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

13 unchanged sentences

BALANCE, December 31, 2019

Issuance of common stock related to vesting of restricted stock

Stock-based compensation

Issuance of convertible notes

BALANCE, March 31, 2020

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

2 unchanged sentences

Dollar amounts in thousands

For the six months ended December 31,

For the nine months ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation

Purchases of investments by consolidated fund

Sales of investments by consolidated funds

Purchases of investments by consolidated funds

Stock dividends received from GECC

Unrealized (gain) loss on investments

Unrealized loss on investments

Realized gain on investments

Non-cash interest and amortization of debt issuance costs

Loss on extinguishment of debt

Deferred tax benefit

10 unchanged sentences

Accounts payable, accrued liabilities and other liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Acquisition of businesses, net of cash acquired

Purchases of investments

Sales of investments

Participation in related party rights offering

8 unchanged sentences

Dollar amounts in thousands

For the six months ended December 31,

For the nine months ended March 31,

Cash flows from financing activities:

6 unchanged sentences

Capitalized issuance costs

Due to broker of consolidated funds

Repurchases of interests in subsidiary

Proceeds from convertible notes

Payments of debt extinguishment costs

Dividends paid to non-controlling interest holders of DME Inc.

Issuance of Forest preferred stock

Capital contributions from non-controlling interests in consolidated funds

Proceeds from sale of Forest common stock, gross

Net cash provided by (used in) financing activities

Net decrease in cash, cash equivalents and restricted cash

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

3 unchanged sentences

Lease liabilities and right of use assets arising from operating leases

Distribution of HC LLC preferred stock to non-controlling interest holders of DME Inc.

Contingent consideration

Distribution of HC LLC (as defined below) preferred stock to non-controlling interest holders of DME Inc.

Repurchase of GP Corp.

Issuance of convertible notes

The following table reconciles the amounts shown for cash and cash equivalents and restricted cash in the condensed consolidated balance sheets to the amounts shown for cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows.

December 31, 2020

March 31, 2021

June 30, 2020

5 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

December 31, 2020

March 31, 2021

Great Elm Group, Inc.

7 unchanged sentences

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 Exchange Act.

The Holding Company Reorganization (as defined in Note 4 – Holding Company Reorganization) was a tax-free transaction for U.S.

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 5 – Holding Company Reorganization and Financing Transaction) was a tax-free transaction for U.S.

federal income tax purposes for the Company’s shareholders.

2 unchanged sentences

( GECM ), Great Elm Opportunities GP, Inc., Great Elm DME Holdings, Inc.

and Great Elm DME Manager, LLC.

and Great Elm DME Manager, LLC ( DME Manager ).

Majority-owned subsidiaries include Forest, GECC GP Corp., Great Elm FM Acquisition, Inc., Great Elm FM Holdings, Inc., CRIC IT Fort Myers, LLC ( CRIC IT ), Great Elm DME, Inc.

) and Great Elm Healthcare, LLC ( HC LLC ) and its seven wholly-owned subsidiaries.

In addition, we have determined that we are the primary beneficiary in each of Great Elm Opportunity Fund I, LP Series C and Great Elm SPAC Opportunity Fund, LLC ( GESOF ), variable interest entities, and therefore the operations of these funds have been included in our consolidated results.

Summary of Significant Accounting Policies

7 unchanged sentences

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, recognition of rental income, 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 the initial bifurcation and subsequent measurement of embedded derivatives and features and hybrid instruments, 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.

Included in these estimates and assumptions are items that relate to revenue recognition, recognition of rental income, 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 the initial bifurcation and subsequent measurement of embedded derivatives and features and hybrid instruments, 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.

19 unchanged sentences

Management’s evaluation of variable consideration takes into account such factors as past experience, information about specific receivables, Payors and patient customers.

The revenue reserves related to constraints on variable consideration were $ 4.1 million and $ 4.8 million as of December 31, 2020 and June 30, 2020, respectively.

During the three and six months ended December 31, 2020 and 2019, the Company recognized reductions to revenue of $ 1.5 million and $ 2.6 million, and $ 0.5 million and $ 1.4 million, respectively, related to such constraints.

The revenue reserves related to constraints on variable consideration were $ 4.7 million and $ 4.8 million as of March 31, 2021 and June 30, 2020, respectively.

During the three and nine months ended March 31, 2021 and 2020, the Company recognized reductions to revenue of $ 2.2 million and $ 4.9 million, and $ 1.1 million and $ 2.6 million, respectively, related to such constraints.

See Note 3 – Revenue.

1 unchanged sentence

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 six months ended December 31, 2020 relating to prior periods.

There were no material adjustments to revenues made in the nine months ended March 31, 2021 relating to prior periods.

Changes in constraints on variable consideration are recorded as a component of net revenues.

2 unchanged sentences

The Company does not have significant bad debt experience with Payors, and therefore the allowance for doubtful accounts is immaterial.

As of December 31, 2020 and June 30, 2020, the Company had unbilled receivables of approximately $ 1.3 million and $ 1.9 million, respectively, 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.

As of March 31, 2021 and June 30, 2020, the Company had unbilled receivables of approximately $ 1.4 million and $ 1.9 million, respectively, 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.

Previously disclosed unbilled amounts have been updated to reflect current presentation.

2 unchanged sentences

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

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands except per share amounts)

4 unchanged sentences

When calculating earnings per share, we are required to adjust for the dilutive effect of common stock equivalents.

As of December 31, 2020, the Company had 12,307,863 potential shares of common stock, including 9,008,612 potential shares of Company common stock issuable upon conversion of Convertible Notes (as defined in Note 12 – Convertible Notes) and 3,299,251 potential shares issuable upon the exercise of stock options and vesting of restricted stock units and restricted stock awards that are not included in the diluted net loss per share calculations because to do so would be antidilutive.

As of December 31, 2019, the Company had 3,402,602 potential shares of Company common stock issuable upon exercise of the stock options and vesting of restricted stock units and restricted stock awards that are not included in the diluted net loss per share calculations because to do so would be antidilutive.

As of December 31, 2020 and 2019, the Company had an aggregate of 732,909 issued shares that are subject to forfeiture by the employee at a nominal price if service and performance milestones are not met.

As of March 31, 2021, the Company had 13,088,564 potential shares of common stock, including 9,656,616 potential shares of Company common stock issuable upon conversion of Convertible Notes (as defined in Note 13 – Convertible Notes) and 3,431,948 potential shares issuable upon the exercise of stock options and vesting of restricted stock units and restricted stock awards that are not included in the diluted net loss per share calculations because to do so would be antidilutive.

As of March 31, 2020, the Company had 3,459,602 potential shares of Company common stock issuable upon exercise of the stock options and vesting of restricted stock units and restricted stock awards that are not included in the diluted net loss per share calculations because to do so would be antidilutive.

As of March 31, 2021 and 2020, the Company had an aggregate of 732,909 issued shares that are subject to forfeiture by the employee at a nominal price if service and 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.

Restrictions on Subsidiary Dividends

Under the GP Corp.

Note Agreement, GECC GP Corp.

agreed not to declare any dividends until the GP Corp.

Note is satisfied.

Under the Senior Note and Subordinated Note, CRIC IT Fort Myers, LLC is restricted from paying any dividends until the Notes are satisfied.

Under the Senior Note (as defined below) and Subordinated Note (as defined below), CRIC IT Fort Myers, LLC is restricted from paying any dividends until the Notes are satisfied.

The ability of DME Inc.

to pay dividends is subject to compliance with the restricted payment covenants under the DME Revolver.

to pay dividends is subject to compliance with the restricted payment covenants under the DME Revolver (as defined below).

Concentration of Risk

The Company’s net investment revenue and receivables for the periods presented were attributable to the management of one investment vehicle, GECC, which is also a related party.

The Company’s net investment revenue and receivables for the periods presented were primarily attributable to the management of one investment vehicle, GECC, which is also a related party.

See Note 6 – Related Party Transactions.

2 unchanged sentences

The following table summarizes customer concentrations as a percentage of revenues:

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

Government Payor A

3 unchanged sentences

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

December 31, 2020

March 31, 2021

June 30, 2020

4 unchanged sentences

Recently Adopted Accounting Standards

Fair Value Measurements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Fair Value Measurements In August 2018, the FASB issued Accounting Standards Update ( ASU ) 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement , resulting in various disclosures related to fair value measurements being eliminated, modified or supplemented.

4 unchanged sentences

Recently Issued Accounting Standards

Current Expected Credit Losses In June 2016, the FASB issued Accounting Standards Update ( 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.

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.

2 unchanged sentences

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 ) by the end of 2021.

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 the London Interbank Offered Rate ( LIBOR ) by the end of 2021.

The provisions provide optional expedients and exceptions for applying 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.

10 unchanged sentences

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

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands)

40 unchanged sentences

The Company constrains revenue for these estimated adjustments.

There were no material changes in estimates recorded in the six months ended December 31, 2020, relating to prior periods.

There were no material changes in estimates recorded in the nine months ended March 31, 2021, relating to prior periods.

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

5 unchanged sentences

The Company 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 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 COVID-19 pandemic.

However, during the quarter ended June 30, 2020, the Company applied for and received $ 4.4 million in advanced payments from the Centers for Medicare and Medicaid Services 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.

These advance payments will begin to be recouped against the Company’s future Medicare and Medicaid claims beginning in the fourth quarter of our fiscal year 2021.

These amounts are included within deferred revenue on the condensed consolidated balance sheet.

The Company has no other contract liabilities as of December 31, 2020 or September 30, 2020.

The Company has no other contract liabilities as of March 31, 2021 or December 31, 2020.

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 rental revenue recognized is based on historical trends and estimates of future collectability.

As of December 31, 2020 and June 30, 2020, net unbilled sales and services revenue is approximately $ 0.8 million and $ 1.2 million, respectively, and is included in accounts receivable.

As of March 31, 2021 and June 30, 2020, net unbilled sales and services revenue is approximately $ 0.9 million and $ 1.2 million, respectively, and is included in accounts receivable.

Investment Management Revenue

5 unchanged sentences

Management Fees

The Company earns management fees based on the investment management agreement GECM has with GECC.

The performance obligation is satisfied over time as the services are rendered, since GECC simultaneously receives and consumes the benefits provided as GECM performs services.

Under GECC’s investment management agreement with GECM, the base management fee from GECC is calculated at an annual rate of 1.50 % of GECC’s average adjusted gross assets.

The base management fee is calculated based on the average value of GECC’s gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters, and is recognized over time as the services are provided.

Management fees are billed quarterly in arrears.

The Company earns management fees based on the investment management agreements GECM has with GECC and other private funds managed by GECM (collectively, the “Funds”).

The performance obligation is satisfied over time as the services are rendered, since the Funds simultaneously receive and consume the benefits provided as GECM performs services.

Management fee rates range from 1 % to 1.5 % of the management fee assets specified with 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 quarterly.

Management fee revenue is recognized over time as the services are provided.

Incentive Fees

5 unchanged sentences

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 December 31, 2020, there is $ 9.2 million in incentive fees which have been earned per the terms of the investment management agreements but not recognized as they are still subject to the constraints described above.

As of March 31, 2021, there is $ 9.3 million in incentive fees which have been earned per the terms of the investment management agreements but not recognized as they are still subject to the constraints described above.

Administration Fees

18 unchanged sentences

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 six months ended December 31, 2020, relating to prior periods.

There were no material changes in estimates recorded in the nine months ended March 31, 2021, relating to prior periods.

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 million and $ 1.3 million as of December 31, 2020 and June 30, 2020, respectively.

Deferred revenue related to rentals was $ 1.0 million and $ 1.3 million as of March 31, 2021 and June 30, 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 December 31, 2020 and June 30, 2020, net unbilled rental revenue is approximately $ 0.5 million and $ 0.7 million, respectively, and is included in accounts receivable.

As of March 31, 2021 and June 30, 2020, net unbilled rental revenue is approximately $ 0.5 million and $ 0.7 million, respectively, and is included in accounts receivable.

Real Estate Revenue

5 unchanged sentences

These expenses recognized in both revenue and expense may fluctuate from period to period based on actual expense amounts.

Acquisition of Advanced Medical DME, LLC and PM Sleep Lab, LLC

On March 1, 2021 , through its majority-owned subsidiary, DME Inc., the Company acquired Advanced Medical DME, LLC and PM Sleep Lab, LLC ( AMPM ), providers of sleep testing, Positive Air Pressure ( PAP ), and other respiratory products and services in nine locations throughout Kansas and Missouri.

The acquisition is accounted for as a business combination.

The Company expects to achieve synergies and costs reductions through integrating these operations into our existing durable medical equipment operations.

Operating results of the acquired businesses have been included in the consolidated statements of operations since March 1, 2021.

The purchase consideration was $ 1.1 million, comprised of $ 0.4 million paid upon closing net of cash acquired, $ 0.3 placed in escrow for potential satisfaction of certain indemnification obligations, and $ 0.4 million representing the acquisition date fair value of contingent consideration.

We have recorded a preliminary allocation of the purchase price for AMPM, which resulted in goodwill of $ 0.7 million and intangible assets, including trade names of $ 0.4 million.

Goodwill was assigned to the durable medical equipment segment and is attributable primarily to expected synergies and the assembled workforce of the acquired business.

None of the goodwill is expected to be deductible for income tax purposes.

The presentation of pro forma financial disclosures are not required in connection with the AMPM acquisition.

The contingent consideration arrangement requires the Company to pay up to $ 2.1 million of additional consideration to the seller if certain revenue thresholds are achieved for the 12 months ended September 1, 2022.

The fair value of the contingent consideration arrangement at the acquisition date was $ 0.4 million.

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 include volatility of 40.0 % and a discount rate of 10.3 %.

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

Holding Company Reorganization and Financing Transaction

8 unchanged sentences

Morgan Broker-Dealer Holdings Inc.

( JPM ), a Delaware corporation and affiliate of JPMorgan Chase & Co., Forest, the Company and JPM agreed to effect certain transactions pursuant to which JPM provided financing in an aggregate amount of $ 37.7 million.

( 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.

In connection with such financing, among other things:

Forest issued to JPM 35,010 newly issued shares of 9.0 % preferred stock (the Forest Preferred Stock ) with a maturity date of December 29, 2027 for $ 1,000.00 per share;

in the form of a distribution.

Ultimately, 80.1 % of such preferred stock is held by Forest, 9.95 % is held by Corbel Capital Partners SBIC, L.P.

HC LLC issued 10,090 newly issued shares of 9.0 % Series A-1 preferred stock (the Series A-1 Preferred Stock ) with a maturity date of December 29, 2027 and face value of $ 1,000.00 per share to the owners of DME Inc., which in turn distributed such preferred stock pro rata to the holders of its common stock such that 80.1 % of such preferred stock is held by Forest, 9.95 % is held by Corbel Capital Partners SBIC, L.P.

( Corbel ), and 9.95 % is held by Valley Healthcare Group, LLC ( VHG ).

6 unchanged sentences

JPM acquired 20 % of Forest’s common stock for a purchase price of $ 2.7 million.

The Company’s wholly-owned subsidiary, DME Manager, concurrently entered into an agreement with Forest to provide advisory services in exchange for annual consulting fees of $ 0.45 million.

(each collectively noted above, the JPM Transactions ).

7 unchanged sentences

In connection with the acquisition of the durable medical equipment businesses in September 2018, DME Inc.

and its subsidiaries entered into a term loan agreement with Corbel (the Corbel Facility ).

and its subsidiaries entered into the Corbel Facility.

Serota, a member of the Company’s board of directors, serves as Vice Chairman to Corbel Capital Partners.

Corbel previously held an interest in one of our acquired durable medical equipment businesses and was one of the sellers in our acquisition of the business.

As a result of the acquisition, at December 31, 2020 Corbel holds a non-controlling interest in DME Inc.

As a result of the acquisition, at March 31, 2021 Corbel holds a non-controlling interest in DME Inc.

Pursuant to the Corbel Facility, Corbel was paid a structuring fee and a quarterly monitoring fee.

14 unchanged sentences

As the general partner, GEO GP provides administrative services and oversees GECM’s management of the investment portfolio of GEOF.

In October 2020, GECM entered into a shared personnel and reimbursement agreement with Imperial Capital Asset Management, LLC ( ICAM ).

Reese, the Executive Chairman 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 three months ended December 31, 2020, such costs were $ 0.1 million.

GEOF is a Delaware multi-series limited partnership.

The Company has determined that each series of GEOF is a VIE and that the criteria for consolidation are met for one of the series (the Consolidated Fund ).

The Company’s wholly-owned subsidiary, GECM, serves as the managing member of GESOF, and provides administrative services and manages the investment portfolio of GESOF.

GEOF is a Delaware multi-series limited partnership and GESOF is a Delaware limited liability company.

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, which series was launched in December 2020 and began liquidation in February 2021 when the net assets of such series, which consisted of limited partnership interests 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 GAAP with respect to the Consolidated Fund.

As such, investments of the Consolidated Fund 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.

As of December 31, 2020 no single issuer or investment of the Consolidated Fund 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 and the investments held in the Consolidated Fund.

The Company has retained the specialized investment company accounting guidance under 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 March 31, 2021 no single issuer or investment of the Consolidated Funds had a fair value greater than 5 % of the Company’s total consolidated assets.

See Note 7 – Fair Value Measurements.

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

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands)

Change in unrealized gain (loss) on investment in GECC

Change in unrealized loss on investment in GECC

Dividend income from GECC

(in thousands)

December 31, 2020

March 31, 2021

June 30, 2020

3 unchanged sentences

Outstanding receivables are included in related party receivables in the condensed consolidated balance sheets.

Outstanding receivables from the Consolidated Fund are eliminated in consolidation.

As of December 31, 2020, the Company had $ 0.01 million in receivable for reimbursable expenses paid on behalf of the Consolidated Fund.

Outstanding receivables from the Consolidated Funds are eliminated in consolidation.

As of March 31, 2021, the Company had $ 0.01 million in receivable for reimbursable expenses paid on behalf of the Consolidated Funds.

The Company is the owner of approximately 23.6 % of the outstanding 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.

4 unchanged sentences

Under the Profit Sharing Agreement, GECM’s profit from GECC is paid to GECC GP Corp.

Since its inception in November 2016, GECM has operated at a cumulative loss through December 31, 2020;

Since its inception in November 2016, GECM has operated at a cumulative loss through March 31, 2021;

correspondingly, no profits were available to GECC GP Corp.

2 unchanged sentences

See Note 15 – Non-Controlling Interests and Preferred Stock of Subsidiaries.

MAST Capital Management, LLC ( MAST Capital ) is the beneficial owner of approximately 7.6 % of the Company’s outstanding common stock as of December 31, 2020 and is the holder of the GP Corp.

MAST Capital Management, LLC ( MAST Capital ) is the beneficial owner of approximately 7.5 % of the Company’s outstanding common stock as of March 31, 2021.

On March 10, 2021, the Company purchased from MAST Capital all of its previously-held shares of GECC 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 12 - Borrowings for additional discussion of the GP Corp.

Note and Note 13 – Convertible Notes for additional discussion of the convertible notes.

In October 2020, GECM entered into a shared personnel and reimbursement agreement with Imperial Capital Asset Management, LLC ( ICAM ).

Reese, the Executive Chairman 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 three months and nine months ended March 31, 2021, such costs were $ 0.1 million and $ 0.2 million.

In connection with the acquisition of the real estate business in March 2018, the Company issued the former owner a 19.9 % interest in Great Elm FM Holdings, Inc.

22 unchanged sentences

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

Fair Value as of December 31, 2020

Fair Value as of March 31, 2021

Investment in GECC

Equity investments of Consolidated Fund

Equity investments of Consolidated Funds

Participation feature of HC LLC Series A-2 Preferred Stock

Contingent consideration liability

Total liabilities

*Balance eliminates in consolidation.

Fair Value as of June 30, 2020

3 unchanged sentences

Total liabilities

The following is a reconciliation of changes in contingent consideration, a Level 3 liability, for the three and six months ended December 31, 2020:

For the six months ended December 31,

The following is a reconciliation of changes in contingent consideration, a Level 3 liability, for the nine months ended March 31, 2021 and 2020:

For the nine months ended March 31,

(in thousands)

2 unchanged sentences

Ending balance

There were no transfers between levels of the fair value hierarchy during the six months ended December 31, 2020 and 2019.

The 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.

There were no transfers between levels of the fair value hierarchy during the nine months ended March 31, 2021 and 2020.

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.

1 unchanged sentence

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 million if certain revenue thresholds of the acquired business are achieved for the 12 months ending September 1, 2022.

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 March 31, 2021 include volatility of 40.0 % and a discount rate of 10.3 %.

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.

4 unchanged sentences

The key assumption used in the option pricing model is a volatility rate of 72.7 % and an option term of 3 years.

Subsequent to the issuance date, fair value of this derivative is determined using a discounted cash flow income approach and a guideline public company market approach.

The key assumptions in applying the valuation approach as of December 31, 2020 include financial forecasts of the durable medical equipment business, a discount rate of 17 % and a discount for lack of marketability of 33 % (level 3 inputs in accordance with the GAAP fair value hierarchy).

The fair value of the embedded derivative as of both the issuance date and December 31, 2020 was $ 6.5 million.

However, as 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 zero within the table above.

Subsequent to the issuance date, fair value of this derivative is determined using an option pricing model based on the estimated value of HC LLC 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 March 31, 2021 include financial forecasts of the durable medical equipment business, a discount rate of 15.5 % and a volatility rate of 66.9 % (level 3 inputs in accordance with the GAAP fair value hierarchy).

The fair value of the embedded derivative as of the issuance date and as of March 31, 2021 was $ 6.5 million and $ 11.3 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 zero within the table above.

However, this valuation does impact our segment results and non-controlling interest accounts.

3 unchanged sentences

(in thousands)

December 31, 2020

March 31, 2021

June 30, 2020

16 unchanged sentences

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

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands)

6 unchanged sentences

The Company’s annual impairment assessment date for goodwill and other intangible assets is April 1.

Goodwill of $ 50.0 million presented on the condensed consolidated balance sheet consists only of the goodwill acquired as part of the acquisitions of the durable medical equipment businesses in September 2018 and June 2019.

Goodwill of $ 50.7 million presented on the condensed consolidated balance sheet consists only of the goodwill acquired as part of the acquisitions of the durable medical equipment businesses beginning in September 2018.

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

For the six months ended December 31,

For the nine months ended March 31,

(in thousands)

Beginning balance

Acquisition of businesses

Purchase accounting adjustment

1 unchanged sentence

The following tables provide details associated with the Company’s identifiable intangible assets subject to amortization (dollar amounts in thousands):

As of December 31, 2020

As of March 31, 2021

As of June 30, 2020

3 unchanged sentences

Durable Medical Equipment

Hospital Contracts

Non-compete agreements

4 unchanged sentences

Aggregate Amortization Expense (in thousands)

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

Estimated Future Amortization Expense (in thousands) :

For the six months ending June 30, 2021

For the three months ending June 30, 2021

For the year ending June 30, 2022

27 unchanged sentences

Rental income from real estate leases is summarized in the following table:

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands)

5 unchanged sentences

Base Rent Payments

For the six months ending June 30, 2021

For the three months ending June 30, 2021

For the year ending June 30, 2022

9 unchanged sentences

(in thousands)

December 31, 2020

March 31, 2021

June 30, 2020

17 unchanged sentences

Weighted-average discount rate

As of December 31, 2020, the Company had remaining right of use assets of $ 5.0 million and lease liabilities of $ 5.3 million (consisting of $ 1.5 million in current portion of lease liabilities and $ 3.8 million in lease liabilities, net of current portion on the condensed consolidated balance sheet) related to the leases discussed herein.

As of March 31, 2021, the Company had remaining right of use assets of $ 5.3 million and lease liabilities of $ 5.5 million (consisting of $ 1.8 million in current portion of lease liabilities and $ 3.7 million in lease liabilities, net of current portion on the condensed consolidated balance sheet) related to the leases discussed herein.

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.

1 unchanged sentence

Additional details are presented in the following table:

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands)

7 unchanged sentences

(in thousands)

For the six months ending June 30, 2021

For the three months ending June 30, 2021

For the year ending June 30, 2022

22 unchanged sentences

(in thousands)

December 31, 2020

March 31, 2021

June 30, 2020

8 unchanged sentences

(in thousands)

December 31, 2020

March 31, 2021

June 30, 2020

9 unchanged sentences

Other outstanding borrowings, net of current portion

The Company incurred interest expense of $ 1.3 million and $ 1.6 million for the three months ended December 31, 2020 and 2019, respectively.

The Company incurred interest expenses of $ 2.7 million and $ 3.3 million for the six months ended December 31, 2020 and 2019, respectively.

The Company incurred interest expense of $ 1.5 million and $ 1.6 million for the three months ended March 31, 2021 and 2020, respectively.

The Company incurred interest expenses of $ 4.2 million and $ 4.9 million for the nine months ended March 31, 2021 and 2020, respectively.

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

1 unchanged sentence

Principal Due

For the six months ending June 30, 2021

For the three months ending June 30, 2021

For the year ending June 30, 2022

8 unchanged sentences

Durable Medical Equipment

In connection with the acquisition of 80.1 % of DME Inc., the Company assumed a secured note ( Corbel Facility ) with a principal balance of $ 8.5 million, which was amended and increased to $ 25 million concurrent with the closing of the first acquisition of the durable medical equipment businesses.

In connection with the acquisition of 80.1 % of DME Inc., the Company assumed the Corbel Facility with a principal balance of $ 8.5 million, which was amended and increased to $ 25 million concurrent with the closing of the first acquisition of the durable medical equipment businesses in September 2018.

In addition, the Company assumed and expanded a revolving line of credit agreement ( DME Revolver ) with a principal balance of $ 0.8 million, which was amended and increased to $ 6.3 million at the date of acquisition.

7 unchanged sentences

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

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands)

1 unchanged sentence

Interest expense

The DME Revolver had a balance of $ 0.0 million at December 31, 2020 and allows for borrowings up to $ 10 million, subject to a fixed percentage of qualifying accounts receivables and inventories related to the durable medical equipment business operations.

The DME Revolver had a balance of $ 0.0 million at March 31, 2021 and allows for borrowings up to $ 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 0.4 % per annum .

At December 31, 2020 the interest rate was 3.7 %.

At March 31, 2021 the interest rate was 3.7 %.

Interest is payable monthly in arrears.

The Company has the option to prepay the borrowings without any penalty.

The Company has classified all borrowings under the DME Revolver as long-term in the condensed consolidated balance sheets as of December 31, 2020 based on the maturity date of the facility.

The Company has classified all borrowings under the DME Revolver as long-term in the condensed consolidated balance sheets as of March 31, 2021 based on the maturity date of the facility.

The borrowings under the DME Revolver are collateralized by the assets of the durable medical equipment business and DME Inc.

1 unchanged sentence

The DME Revolver includes covenants that restrict DME Inc.

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.

’s and its subsidiaries’ business operations to the 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 DME Inc.

must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the DME Inc.

and its subsidiaries on a consolidated basis must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the DME Inc.

EBITDA levels.

T he DME Revolver are non-recourse to the Company.

T he obligations under the DME Revolver are non-recourse to the Company.

DME Inc’s operating subsidiaries also utilize equipment financing debt to fund certain inventory and equipment purchases from suppliers.

1 unchanged sentence

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 %.

During the six months ended December 31, 2020 and 2019, the Company financed $ 1.6 million and $ 1.3 million, respectively, in inventory and equipment through such financing agreements.

During the nine months ended March 31, 2021 and 2020, the Company financed $ 1.6 million and $ 1.3 million, respectively, in inventory and equipment through such financing agreements.

Investment Management

Note matures in November 2026 , accrues interest at a variable rate of three-month LIBOR plus 3.0 % per annum and is secured by a profit sharing agreement related to GECM’s management of GECC.

At December 31, 2020 the interest rate was 3.2 %.

Note requires quarterly interest only payments and annual principal payments of $ 0.08 million each June 30.

Note is non-recourse to any of the Company’s operations or net assets not related to GECM’s management services to GECC.

Note may be prepaid at par value at any time with prior written notice to the holders of the GP Corp.

Additionally, GECC GP Corp.

is required to prepay the GP Corp.

Note upon certain material liquidation transactions including any termination of the Profit Sharing Agreement.

Note is held by MAST Capital, a related party.

On March 10, 2021 GEG purchased the GP Corp.

Note as well as non-controlling interests in GECC GP Corp.

and certain board appointment rights from MAST Capital.

In exchange, GEG issued $ 2.3 million of Convertible Notes.

As MAST Capital is 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 million.

Payments and interest expense incurred on the GP Corp.

Note are summarized in the following table:

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands)

21 unchanged sentences

On February 26, 2020, the Company issued Convertible Notes at par with an aggregate principal balance of $ 30 million due February 26, 2030 (the Convertible Notes ).

As of December 31, 2020 the total principal balance of Convertible Notes outstanding was $ 31.3 million including cumulative interest paid-in-kind.

In addition, on March 10, 2021, the Company issued additional Convertible Notes to MAST Capital in an aggregate principal amount of $ 2.3 million.

As of March 31, 2021 the total principal balance of Convertible Notes outstanding was $ 33.5 million including cumulative interest paid-in-kind.

The Convertible Notes are held by a consortium of investors, including $ 15.9 million issued to certain related parties.

8 unchanged sentences

Scheyer, a member of the Company’s board of directors.

$ 2.3 million issued to MAST Capital, owner of 7.6 % of our outstanding company stock.

The Convertible Notes accrue interest at 5.0 % per annum, payable semiannually in arrears on June 30 and December 31, commencing June 30, 2020, in cash or in kind at the option of the Company.

2 unchanged sentences

The embedded conversion feature in the Convertible Notes qualifies for the scope exception to derivative accounting in ASC Topic 815, Derivatives and Hedging, for certain contracts involving a reporting entity’s own equity.

However, due to a Company option to settle any conversion request by holders prior to July 1, 2020 in either cash or in shares, the conversion option is bifurcated and recorded to additional paid-in-capital within equity, creating a debt discount.

However, due to a Company option to settle any conversion request by holders prior to July 1, 2020 in either cash or in shares, the conversion option on the original $ 30 million issuance is bifurcated and recorded to additional paid-in-capital within equity, creating a debt discount.

In valuing the conversion option, we estimated that the yield on an identical non-convertible instrument would be 12.5 %, resulting in a debt discount of $ 12.6 million.

The Company incurred $ 1.2 million in issuance costs, which were allocated ratably between the debt and equity portions of the instrument.

The Company incurred $ 1.2 million in issuance costs on the original issuance, which were allocated ratably between the debt and equity portions of the instrument.

Both the debt discount and debt issuance costs are being amortized over the 10 -year Convertible Notes term and are netted with the principal balance within convertible debt on our condensed consolidated balance sheet.

The Company incurred interest expense of $ 0.6 million and $ 1.1 million related to the convertible notes for the three and six months ended December 31, 2020 .

As the cash conversion option had expired prior to the issuance of the incremental Convertible Notes issued and paid-in-kind, no bifurcation was required on these issuances, and such Convertible Notes were recorded at par.

The Company incurred interest expense of $ 0.7 million and $ 0.2 million related to the convertible notes for the three months ended March 31, 2021 and 2020, respectively.

The Company incurred interest expense of $ 1.8 million and $ 0.2 million for the nine months ended March 31, 2021 and 2020, respectively.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ( CARES Act ) was passed into law.

9 unchanged sentences

Between funding and June 30, 2020, the Company spent these proceeds on covered purposes and recognized the proceeds as a reduction to operating expenses.

The Company has submitted a forgiveness application to the U.S.

Small Business Administration seeking full forgiveness of the PPP Loan.

The Company has submitted a forgiveness application to the SBA seeking full forgiveness of the PPP Loan.

The eligibility requirement of the PPP Loan is subjective, and if determined that we were ineligible to receive the PPP Loan we could be required to pay the PPP Loan in its entirety.

9 unchanged sentences

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 Act, including modifying and extending the Employee Retention Credit ( 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 % of qualified wages paid to employees during calendar 2021 for a maximum credit per employee of $ 7,000 per employee for each calendar quarter through June 30, 2021.

During the quarter ended March 31, 2021, the Company claimed ERCs of $ 2.5 million, consisting of $ 2.3 million recognized as a reduction to operating expenses and $ 0.2 million acquired in purchase accounting.

Such claimed ERCs not settled prior to quarter end were settled shortly thereafter and are disclosed as a separate current asset line item on our consolidated balance sheet.

We will continue to monitor our eligibility for this credit during the quarter ending June 30, 2021.

Non-Controlling Interests and Preferred Stock of Subsidiaries

3 unchanged sentences

(in thousands)

December 31, 2020

March 31, 2021

June 30, 2020

6 unchanged sentences

Permanent equity

Total Non-controlling interests

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

For the three months ended December 31,

For the six months ended December 31,

For the three months ended March 31,

For the nine months ended March 31,

(in thousands)

6 unchanged sentences

Permanent equity

Non-controlling interest in DME Inc.

23 unchanged sentences

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 % interest in GP Corp.

During the quarter ended March 31, 2021, the Company repurchased 15.6 % of such interests, leaving a 4.3 % non-controlling interest in GP Corp.

as of March 31, 2021.

GE FM Holdings – Non-controlling interest classified as permanent equity

7 unchanged sentences

See Note 6 – Related Party Transactions.

GESOF – Non-controlling interest classified as permanent equity

As of March 31, 2021, GEG held 76.8 % of the capital in the fund.

The remaining 23.2 % of capital in GESOF is recorded as a non-controlling interest.

These non-controlling interests of GESOF include affiliated individuals and entities.

Redeemable Preferred Stock of Subsidiaries

1 unchanged sentence

(in thousands)

December 31, 2020

March 31, 2021

June 30, 2020

57 unchanged sentences

Restricted Stock Awards (Performance Shares) and Restricted Stock Units

During the six months ended December 31, 2020, there were no awards or forfeitures of restricted stock awards included in the below table and 732,909 remain outstanding as of December 31, 2020.

During the nine months ended March 31, 2021, there were no awards or forfeitures of restricted stock awards included in the below table and 732,909 remain outstanding as of March 31, 2021.

Restricted stock awards granted have both performance and service requirements in connection with the formation of the investment management business.

1 unchanged sentence

In order to recognize compensation expense over the vesting period, the Company estimates the probability of the performance target being met on an on-going basis.

As of December 31, 2020, the Company estimates that approximately 243,322 of the restricted stock awards are probable of vesting under the performance condition.

As of March 31, 2021, the Company estimates that approximately 241,347 of the restricted stock awards are probable of vesting under the performance condition.

Restricted stock units are subject to service requirements.

The Company accounts for forfeitures of the restricted stock units in the period incurred.

During the three and six months ended December 31, 2020 the Company granted 0 and 44,490 shares of restricted stock units, respectively, to employees and directors.

The activity of the Company’s restricted stock awards and units for the six months ended December 31, 2020 was as follows:

During the three and nine months ended March 31, 2021 the Company granted 18,120 and 305,299 shares of restricted stock units, respectively, to employees and directors.

The activity of the Company’s restricted stock awards and units for the nine months ended March 31, 2021 was as follows:

Restricted Stock Awards and Restricted Stock Units

3 unchanged sentences

Outstanding at June 30, 2020

Outstanding at December 31, 2020

Outstanding at March 31, 2021

Stock Options

The following table summarizes the Company’s option award activity as of and through December 31, 2020:

The following table summarizes the Company’s option award activity as of and through March 31, 2021:

(in thousands)

6 unchanged sentences

Forfeited, cancelled or expired

Outstanding at December 31, 2020

Exercisable at December 31, 2020

Vested and expected to vest as of December 31, 2020

During the three months ended December 31, 2020 and 2019, the Company recognized total stock-based compensation associated with all restricted stock and stock options of $ 0.3 million and $ 0.2 million, respectively.

During the six months ended December 31, 2020 and 2019, the Company recognized total stock-based compensation associated with all restricted stock and stock options of $ 0.7 million and $ 0.3 million, respectively.

As of December 31, 2020, unrecognized compensation costs associated with outstanding stock and stock-linked awards totaled approximately $ 1.7 million.

Outstanding at March 31, 2021

Exercisable at March 31, 2021

Vested and expected to vest as of March 31, 2021

During the three months ended March 31, 2021 and 2020, the Company recognized total stock-based compensation associated with all restricted stock and stock options of $ 0.6 million and $ 0.3 million, respectively.

During the nine months ended March 31, 2021 and 2020, the Company recognized total stock-based compensation associated with all restricted stock and stock options of $ 1.3 million and $ 0.2 million, respectively.

As of March 31, 2021, unrecognized compensation costs associated with outstanding stock and stock-linked awards totaled approximately $ 1.7 million.

As of June 30, 2020, the Company had net operating loss ( NOL ) carryforwards for federal and state income tax purposes of approximately $ 1.5 billion and $ 203 million, respectively.

13 unchanged sentences

The following tables illustrate results of operations by segment:

For the three months ended December 31, 2020

For the three months ended March 31, 2021

(in thousands)

18 unchanged sentences

Total pre-tax income (loss)

For the three months ended December 31, 2019

For the three months ended March 31, 2020

(in thousands)

18 unchanged sentences

Total pre-tax income (loss)

For the six months ended December 31, 2020

For the nine months ended March 31, 2021

(in thousands)

18 unchanged sentences

Total pre-tax income (loss)

For the six months ended December 31, 2019

For the nine months ended March 31, 2020

(in thousands)

18 unchanged sentences

Total pre-tax income (loss)

The Company’s wholly-owned subsidiary, Great Elm DME Manager, LLC ( DME Manager ), provides advisory services to DME Inc.

The Company’s wholly-owned subsidiary, DME Manager, provides advisory services to DME Inc.

and receives consulting fee from DME Inc.

4 unchanged sentences

and revenue to DME Manager are eliminated in consolidation.

Additionally, the Company’s majority-owned subsidiary, Forest, owns Series A-1 Preferred Stock and Series A-2 Preferred Stock of HC LLC.

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.

4 unchanged sentences

The following tables illustrate assets by segment:

As of December 31, 2020

As of March 31, 2021

(in thousands)

12 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 1. Financial Statements