10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number 001-16073

GREAT ELM CAPITAL GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware	94-3219054
(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)

Registrant’s telephone number, including area code: (617) 375-3006

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.001 per share	GEC	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)
Preferred Stock Purchase Rights		Nasdaq Global Select Market
Units, par value $0.001 per share		Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

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.

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

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 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, 2018, was $76,615,337.  Shares of common stock held by persons who are not directors or executive officers, including persons who own more than 5% of the outstanding shares of common stock, are included in that such persons are not deemed to be affiliates for the purpose of this calculation.

The number of shares of the Registrant’s common stock outstanding as of September 5, 2019 was 25,382,503.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement, which will be filed with the SEC within 120 days following June 30, 2019, in connection with the Registrant’s 2019 Annual Stockholders’ Meeting are incorporated by reference into Part III of this Form 10‑K.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	2
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosures	19
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Financial Statements and Supplementary Data	40
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	40
Item 9A.	Controls and Procedures	40
Item 9B.	Other Information	46
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	46
Item 11.	Executive Compensation	46
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	46
Item 13.	Certain Relationships and Related Transactions, and Director Independence	46
Item 14.	Principal Accounting Fees and Services	46
PART IV
Item 15.	Exhibits, Financial Statement Schedules	47
Item 16	Form 10-K Summary	47
Exhibit Index		48
Signatures		51
Index to Financial Statements		F-1

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

Cautionary Statement Regarding Forward-Looking Information

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:

▪ our ability to profitably manage Great Elm Capital Corp. (NASDAQ: GECC), a business development company (BDC) that we manage through our investment management business;

▪ the dividend rate that GECC will pay;

▪ our ability to continue to develop and grow our durable medical equipment, investment management and real estate businesses;

▪ our ability to raise capital to fund our business plan;

▪ our ability to make acquisitions and manage any businesses we acquire;

▪ conditions in the equity capital markets and debt capital markets as well as the economy generally;

▪ our ability to maintain the security of electronic and other confidential information;

▪ serious disruptions and catastrophic events;

▪ competition, mostly from larger, well-financed organizations (both domestic and foreign), including operating companies, global asset managers, investment banks, commercial banks, and private equity funds;

▪ outcomes of litigation and proceedings and the availability of insurance, indemnification and other third-party coverage of any losses suffered in connection therewith;

▪ maintaining our contractual arrangements and relationships with third parties;

▪ our ability to attract, assimilate and retain key personnel;

▪ compliance with laws, regulations and orders;

▪ changes in laws and regulations governing our operations; and

▪ other factors described under “Item 1A. Risk Factors” or as set forth from time to time in our Securities and Exchange Commission (SEC) filings.

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.

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PART I

Item 1.  Business.

Overview

We are a holding company seeking to acquire assets and businesses, where our people and other assets provide a competitive advantage.  We currently have four business operating segments: durable medical equipment, investment management, real estate, and general corporate.

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:

▪ continuous review of acquisitions of businesses, securities and assets that generate attractive risk-adjusted returns and exhibit the potential for significant long-term value creation;

▪ effective use of the skills of our team and our financial resources, including our tax assets, our willingness to create bespoke solutions and our ability to prudently assume risks; and

▪ constant evaluation of the retention and disposition of our operations and holdings.

In recent years, we have made a number of changes in our business:

▪ During the year ended June 30, 2017, we:

▪ established our investment management business and became the investment manager to GECC through our wholly-owned subsidiary Great Elm Capital Management, Inc. (GECM); and

▪ completed a backstopped rights offering for approximately $45.0 million of proceeds, before deducting offering costs.

▪ During the year ended June 30, 2018, we:

▪ commenced our real estate business and determined that it was a separate reportable segment; and

▪ expanded our investment management business with agreements to provide investment management services to separate accounts for an institutional investor.

▪ During the year ended June 30, 2019, we:

▪ launched a new credit focused fund, Great Elm Opportunities Fund I, LP (GEOF), with a mandate to invest across the capital structure in niche, small and middle market opportunities with a catalyst for value-realization;

▪ commenced our durable medical equipment business and determined that it was a separate reportable segment; and

▪ subsequently, expanded our durable medical equipment business through the acquisition of certain operations of Midwest Respiratory Care, Inc.

As of June 30, 2019, we had approximately $1.6 billion of net operating loss (NOL) carryforwards for Federal income tax purposes.

Our Durable Medical Equipment Business

In September 2018, we launched our durable medical equipment segment by acquiring two durable medical equipment businesses that specialize in the distribution of respiratory care equipment, including positive air pressure equipment and supplies, ventilators and oxygen equipment, and provide sleep study services.

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Our Investment Management Business

We decided to invest in the asset management business because of our assessment of its ability to generate recurring free cash flows, its growth prospects and our Board of Directors’ (our Board) and employees’ industry expertise.  GECM, our wholly-owned registered investment adviser subsidiary, is an investment adviser providing investment management services to GECC, our largest investment vehicle, as well as GEOF and separate accounts for an institutional investor.  The combined assets under management for these entities as of June 30, 2019 was approximately $273.5 million.

Our BDC, GECC, was established in 2016.  At this time, GECC elected to be treated as a BDC under the Investment Company Act of 1940, as amended (the Investment Company Act).  We own approximately 19.5% of GECC’s shares that we may hold to generate dividends or sell to redeploy our capital in higher yielding opportunities.

GECM earns revenue through investment management agreements with each investment vehicle which provide for management fees, incentive fees and/or administrative fees.  These fees are generally based on assets under management, investment performance and allocable expenses incurred in the administration of these investment vehicles.

Our Real Estate Business

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 is fully-leased, on a triple-net basis, to a single tenant through March 31, 2030.

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

Acquisition Program

GEC’s team continues to monitor and identify opportunities in the durable medical equipment, investment management, real estate and other sectors through the acquisition of operating businesses.  In the fiscal year ended June 30, 2019, we evaluated a number of opportunities in these areas.

Competition

We face competition from larger, well financed organizations (both domestic and foreign), including operating companies, global asset managers, investment banks, commercial banks, private equity funds, sovereign wealth funds and state-owned enterprises.  Government regulation is a key competitive factor for certain industries.

Employees

We had 328 employees as of June 30, 2019, including the 317 employees of our durable medical equipment subsidiaries added during the 2019 fiscal year in connection with the durable medical equipment business acquisitions.

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Information about Great Elm on the Internet

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:

▪ Code of Ethics;

▪ Reportable waivers, if any, from our Code of Ethics by our executive officers;

▪ Charter of the audit committee of our Board;

▪ Charter of the nominating and corporate governance committee of our Board;

▪ Charter of the compensation committee of our Board;

▪ Annual reports on Form 10-K;

▪ Quarterly reports on Form 10-Q;

▪ Current reports on Form 8-K;

▪ Proxy or information statements we send to our stockholders; and

▪ Any amendments to the above-mentioned documents and reports.

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 Capital Group, Inc., 800 South Street, Suite 230, Waltham, MA 02453; Attention: Investor Relations, or by calling (617) 375-3006.

Our corporate headquarters is located at 800 South Street, Suite 230, Waltham, Massachusetts 02453.  Our corporate website address is www.greatelmcap.com.  We are a Delaware corporation that was incorporated in 1994 and completed our initial public offering in 1999.

The contents of the websites referred to above are not incorporated into this filing.  

Item 1A.  Risk Factors.

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.  

Risks Related to Our Business

We have a limited track record in the investment management, durable medical equipment and real estate businesses, and provide no assurance as to our acquisition and investment program.  We entered the investment management business in November 2016, we entered the real estate business in March 2018, 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.

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Our growth strategy may not be successful.  The process to identify potential investment opportunities and acquisition targets, to investigate and evaluate the future returns therefrom and business prospects thereof and to 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, 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.  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 operations and personnel.

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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 could adversely affect our business in many ways, including the following:

▪ Limitations on the availability of credit could affect our ability to borrow on a secured or unsecured basis, which may adversely affect our liquidity and results of operations.  Global market and economic conditions have been disrupted and volatile in the last several years and may be in the future.  Our cost and availability of funding could be affected by illiquid credit markets and wider credit spreads.

▪ Should one of our customers, debtors or competitors fail, our business prospects and revenue could be negatively impacted due to negative market sentiment causing customers to cease doing business with us and our lenders to cease extending credit to us, which could adversely affect our business, funding and liquidity.

We may not be able to generate sufficient taxable income to fully realize our deferred tax asset, which would also have to be reduced if U.S. federal income tax rates are lowered.  At June 30, 2019, we had NOL carryforwards of approximately $1.6 billion.  If we are unable to generate sufficient taxable income, we will not be able to fully realize the full amount of the deferred tax asset.  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.  Changes that are adverse to us could result in the need to increase the deferred tax asset valuation allowance resulting in a charge to results of operations and a decrease to stockholders’ equity.  In addition, if U.S. federal income tax rates are lowered, we would be required to reduce our net deferred tax asset with a corresponding reduction to earnings during the period.

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.

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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.  The incurrence of debt could have a variety of negative effects, including:

▪ default and foreclosure on our assets if our operating cash flows are insufficient to repay our debt obligations;

▪ acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach covenants that require the maintenance of financial ratios or reserves without a waiver or renegotiation of that covenant;

▪ our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;

▪ our inability to pay dividends on our common stock;

▪ using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock (if declared), expenses, capital expenditures, acquisitions and other general corporate purposes;

▪ limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

▪ increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and

▪ limitation on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

There are conflicts of interest involving MAST Capital Management, LLC (MAST Capital) and its affiliates, that own approximately 7.9% of the Company’s outstanding stock, and are participants in material transactions.  These conflicts of interest, include, among others:

▪ Funds managed by MAST Capital are a significant stockholder and appointed two members of our Board;

▪ Funds managed by MAST Capital owned all of our previously outstanding senior secured notes which we settled in October 2016 for total cash payments of approximately $39.8 million;

▪ Peter A. Reed was a partner in MAST Capital, became our Chief Executive Officer in September 2017, is a member of our Board, Chief Executive Officer of GECC and Chief Investment Officer of GECM;

▪ Adam M. Kleinman was a partner in MAST Capital, became our President and Chief Operating Officer in March 2018, is Chief Compliance Officer of GECC and Chief Operating Officer, Chief Compliance Officer and General Counsel of GECM;

▪ In connection with hiring the MAST Capital team, we took over a substantial portion of the operating expenses of MAST Capital and those transactions were restructured in September 2017;

▪ We assumed certain of MAST Capital’s commercial contracts, leases and other obligations; and

▪ MAST Capital will receive compensation in connection with GECC’s business through its equity ownership of GECC GP Corp. (GP Corp.) and a note payable of GP Corp.

These conflicts of interest may result in arrangements that are not as favorable to us as those available on an arms-length basis.  The significant ownership stake held by certain private investment funds managed by MAST Capital (the MAST Funds) may result in MAST Capital having undue influence over our affairs.  These conflicts of interests may adversely affect the perception of our company, the value of our common stock or the willingness of new investors to invest in us.

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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.

We may incur losses if our risk management is not effective.  We seek to monitor and control our risk exposure.  Our risk management processes and procedures are designed to limit our exposure to acceptable levels as we conduct our business.  While we intend to employ various risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application, including risk tolerance determinations, cannot anticipate every economic and financial outcome or the specifics and timing of such outcomes.  As a result, we may incur losses notwithstanding our risk management processes and procedures.

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.

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In addition, our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports our businesses and the communities in which they are located.  This may include a disruption involving electrical, communications, transportation or other services used by us or third parties with which we conduct business.  Our operations will rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks.  Our computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code, and other events that could have a security impact.  Additionally, if a customer’s computer system, network or other technology is compromised by unauthorized access, we may face losses or other adverse consequences by unknowingly entering into unauthorized transactions.  If one or more of such events occur, this potentially could jeopardize our, our customers’ or counterparties’ confidential and other information processed and stored in, and transmitted through, our computer systems and networks.  Furthermore, such events may cause interruptions or malfunctions in our, our customers’, our counterparties’ or third parties’ operations, including the transmission and execution of unauthorized transactions.

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.

We have identified material weaknesses in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements.  In connection with the audit of our consolidated financial statements as of and for the year ended June 30, 2019, we have identified and concluded that we continue to have material weaknesses relating to our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. See Part II, Item 9A in this Form 10-K for more details. While the material weaknesses described in that section creates a reasonable possibility that an error in financial reporting may go undetected, after extensive review and the performance of additional analysis and other procedures, no material adjustments, restatement or other revisions to our previously issued financial statements were required.

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As further described in Part II, Item 9A of this Form 10-K below, we are taking specific steps to remediate our material weaknesses that we identified by implementing and enhancing our internal control procedures. These material weaknesses will not be considered remediated until all necessary internal controls have been implemented, repeatably tested and determined to be operating effectively. In addition, we may need to take additional measures to address the material weakness or modify the remediation steps, and we cannot be certain that the measures we have taken, and expect to take, to improve our internal controls will be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that the identified material weaknesses will not result in a material misstatement of our annual or interim consolidated financial statements.

Catastrophic events (or a combination of events), such as terrorism/sabotage, or fire, as well as deliberate cyber terrorism, could adversely impact our financial performance.  Our business operating segments could be exposed to effects of catastrophic events, such as severe weather conditions, natural disasters, major accidents, acts of malicious destruction, sabotage or terrorism, which could adversely impact our operations and financial performance.

Additionally, the perceived threat of a terrorist attack could negatively impact us.  Any damage or business interruption costs as a result of uninsured or underinsured acts of terrorism could result in a material cost to us and could adversely affect our business, financial condition or results of operation.  Adequate terrorism insurance may not be available at rates we believe are reasonable in the future.  All of the risks indicated in this paragraph could be heightened by foreign policy decisions of the U.S. and other influential countries or general geopolitical conditions.

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.

Risks Related to Our Durable Medical Equipment Business

Adverse trends in the healthcare industry may negatively affect our investment in Great Elm DME, Inc. (DME Inc.), a supplier of durable medical equipment and services.

The healthcare industry is currently experiencing, among other things:

▪ changes in the demand for and methods of delivering healthcare services;

▪ competition among healthcare providers;

▪ consolidation of large health insurers;

▪ regulatory and government reimbursement uncertainty resulting from the Patient Protection and Affordable Care Act (the ACA) and other healthcare reform laws;

▪ federal court decisions on cases challenging the legality of certain aspects of the ACA;

▪ federal and state government plans to reduce budget deficits and address debt ceiling limits by lowering healthcare provider Medicare and Medicaid reimbursement rates;

▪ changes in third-party reimbursement methods and policies; and

▪ increased scrutiny of billing, referral and other practices by U.S. federal and state authorities.

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

A significant portion of DME Inc.’s rental patients who 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 DME Inc., which could materially and adversely affect our business and operating results.

As a provider of respiratory-related product rentals, a portion of DME Inc.’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, and the 21^st Century Cures Act contain provisions that directly impact reimbursement for the durable medical equipment products supplied by DME Inc. These legislative provisions as currently in effect and any changes to such provisions in the future will continue to have a material effect on DME Inc.’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 DME Inc.’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 DME Inc.’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 DME Inc.

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 expected to be re-bid every three years.

We continue to monitor developments regarding the implementation of this competitive bidding program, but we are currently unable to predict the outcome of the competitive bidding program on DME Inc. once fully implemented. 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 DME Inc.

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 that is expected to last until December 31, 2020.  The bids the for 2021 competitive bidding program were due on September 18, 2019.

Since 2011, the competitive bidding program has undergone several rounds, awarding contracts to program winners to supply durable medical equipment in competitive bid areas. Certain operating subsidiaries of DME Inc. currently have contracts in Phoenix and Tucson, AZ, as well as Omaha, NE, where it anticipates new competition as a result of the expiration of contracts that could adversely affect the financial conditions and results of operations of DME Inc.

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DME Inc. 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.

DME Inc. utilizes single-source suppliers for some of the components and subassemblies it uses in its sleep and respiratory-focused durable medical equipment. DME Inc.’s use of single-source suppliers for some components of its durable medical equipment may expose it to several risks, including, among other things:

▪ its suppliers may encounter financial hardships as a result of unfavorable economic and market conditions unrelated to its demand for components, which could inhibit their ability to fulfill orders and meet DME Inc.’s requirements;

▪ suppliers may fail to comply with regulatory requirements, be subject to lengthy compliance, validation or qualification periods, or make errors in manufacturing components that could negatively affect the performance or safety of DME Inc.’s products or cause delays in the supplying of DME Inc.’s products to its customers;

▪ newly identified suppliers may not qualify under the stringent quality regulatory standards to which DME Inc.’s business is subject;

▪ DME Inc. or its suppliers may not be able to respond to unanticipated changes in customer orders, and if orders do not match forecasts, DME Inc. or its suppliers may have excess or inadequate inventory of materials and components;

▪ DME Inc. may be subject to price fluctuations due to a lack of long-term supply arrangements for key components;

▪ DME Inc. may experience delays in delivery by its suppliers due to customs clearing delays, shipping delays, scarcity of raw materials or changes in demand from DME Inc. or their other customers;

▪ DME Inc. or its suppliers may lose access to critical services and components, resulting in an interruption in the manufacture, assembly and shipment of its systems;

▪ DME Inc.’s suppliers may be subject to allegations by other parties of misappropriation of proprietary information in connection with their supply of products to DME Inc., which could inhibit their ability to fulfill DME Inc.’s orders and meet its requirements;

▪ fluctuations in demand for products that DME Inc.’s suppliers manufacture for others may affect their ability or willingness to deliver components to DME Inc. in a timely manner;

▪ DME Inc.’s suppliers may wish to discontinue supplying components or services to DME Inc.; and

▪ DME Inc. may not be able to find new or alternative components or reconfigure its system and manufacturing processes in a timely manner if the necessary components become unavailable.

DME Inc. 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 DME Inc.’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.

DME Inc. 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 DME Inc.’s rental revenue is derived from reimbursement by third-party payors. DME Inc. 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.

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DME Inc.’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, DME Inc. 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. DME Inc. is also subject to extensive pre-payment and post-payment audits by governmental and private payors that could result in material delays, refunds of monies received or denials of claims submitted for payment under such third-party payor programs and contracts. We cannot ensure that DME Inc. 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 DME Inc.’s business, financial conditions and results of operations.

If DME Inc. fails to comply with state and federal fraud and abuse laws, including anti-kickback, Stark, false claims and anti-inducement laws, it, and we, could face substantial penalties and DME Inc.’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. DME Inc.’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 DME Inc. 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 DME Inc.’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.

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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 DME Inc.’s intent to comply with all applicable laws, the government may find that DME Inc.’s marketing activities violate the Civil Monetary Penalties Law. If it is found to be in non-compliance, DME Inc. 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 DME Inc.’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 DME Inc.’s operations. Any penalties, damages, fines, curtailment or restructuring of DME Inc.’s operations could harm its ability to operate its business, and ultimately our financial results. Any action against DME Inc. for violation of these laws, even if successfully defended against, could cause DME Inc. 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.

Risks Related to Our Investment Management Business

Our investment management agreements may be terminated.  The investment management agreements (IMAs) we have through GECM with various pooled investment vehicles, such as GECC, 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.

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In July 2017, the head of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced the desire to phase out the use of LIBOR by the end of 2021. It is unclear if at that time whether or not LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. As a result of this transition, interest rates on financial instruments tied to LIBOR, as well as the revenue and expenses associated with those financial instruments, may be adversely affected. Further, any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could adversely affect the value of our financial instruments tied to LIBOR. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities, called the Secured Overnight Financing Rate (SOFR). The first publication of SOFR was released in April 2018. If LIBOR ceases to exist, GECC may need to renegotiate outstanding loans to its 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. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain. As such, the potential effect of any such event on our cost of capital and investment income cannot yet be determined.

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:

▪ restrictions on the nature of our investments;

▪ limitations on our ability to borrow;

▪ prohibitions on transactions with affiliates; and

▪ restrictions on the issuance of securities.

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

▪ registration as an investment company and subsequent regulation as an investment company;

▪ adoption of a specific form of corporate structure; and

▪ reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.

In 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 the MAST Funds, 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 the MAST Funds or our executive officers and directors.

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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.

Risks Related to Our Real Estate Business

Our initial investment through our real estate business includes the Property leased pursuant to a long-term triple net lease and the failure of the tenant to satisfy its obligations under the lease may adversely affect the condition of the Property or the results of our real estate business segment.  Because the Property is leased pursuant to a long-term triple net lease, we depend on the tenant to pay all insurance, taxes, utilities, common area maintenance charges, maintenance and repair expenses and to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with its business, including any environmental liabilities resulting from the tenant’s failure to comply with applicable environmental laws.  There are no assurances that the tenant will have sufficient assets and income to enable it to satisfy its payment obligations to us under the lease.  The inability or unwillingness of the tenant to meet its rent obligations could materially adversely affect the business, financial position or results of operations of our real estate business segment.  Furthermore, the inability or unwillingness of the tenant to satisfy its other obligations under the lease, such as the payment of insurance, taxes and utilities, could materially and adversely affect the condition of the Property.  Our triple net lease agreement requires that the tenant maintains comprehensive liability and all risk property insurance.  However, there are certain types of losses (including losses arising from environmental conditions or of a catastrophic nature, such as earthquakes, hurricanes and floods) that may be uninsurable or not economically insurable.  Insurance coverage may not be sufficient to pay the full current market value or current replacement cost of a loss.  Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace the Property after such property has been damaged or destroyed.  In addition, if we experience a loss that is uninsured or that exceeds policy coverage limits, we could lose the capital invested in the Property as well as the anticipated future cash flows from the Property.

We are subject to risks inherent in ownership of real estate.  Cash flows from our real estate business segment and real estate values are affected by a number of factors, including competition from other available properties and the ability to provide adequate property maintenance and insurance and to control operating costs.  Cash flows from our real estate business segment and real estate values are also affected by such factors as governmental regulations (including zoning, usage and tax laws), property tax rates, utility expenses, potential liability under environmental and other laws and changes in environmental and other laws.

Natural disasters, terrorist attacks or other unforeseen events could cause damage to the property we currently own, or may in the future own, resulting in increased expenses and reduced revenues.  Natural disasters, such as earthquakes, hurricanes and floods, or terrorist attacks could cause significant damage and require significant repair costs, and make the property we currently own, or may in the future own, temporarily uninhabitable, reducing our revenues.  Damage and business interruption losses could exceed the aggregate limits of any insurance coverage we may have.  We may not have sufficient insurance coverage for losses caused by a terrorist attack, or such insurance may not be maintained, available or cost-effective.

We may incur significant liabilities from environmental contamination.  Existing or future laws impose or may impose liability on us to clean up environmental contamination on or around the property that we currently own, or may in the future own, even if we were not responsible for or aware of the environmental contamination or even if such environmental contamination occurred prior to our involvement with such property.  From time to time, we may conduct environmental assessments, commonly referred to as “Phase 1 Environmental Reports,” on properties in which we are considering an investment.  These assessments typically include an investigation (excluding soil or groundwater sampling or analysis) and a review of publicly available information regarding the site and other nearby properties.  However, such environmental assessments may not identify all potential environmental liabilities.

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We may face potential difficulties or delays renewing leases or re-letting space.  We currently derive all of our real estate business income from rent received from a single tenant in connection with our initial investment in two Class A office buildings in Fort Myers, FL.  If the tenant experiences a downturn in its business or other types of financial distress, it may be unable to make timely rental payments.  Also, in the event that the tenant does not renew the lease, we may not be able to re-let the space or there could be a substantial delay in re-letting the space.  Even if the tenant decides to renew or lease new space, the terms of renewals or new leases, including the cost of required renovations or concessions, may be less favorable to us than the current lease term.

We face potential adverse effects from a tenant’s bankruptcy or insolvency.  The bankruptcy or insolvency of a tenant may adversely affect the income produced by our property, or by any properties we may own in the future.  Our tenant could file for bankruptcy protection or become insolvent in the future.  A bankrupt tenant may reject and terminate its lease with us.  In such case, our claim against the bankrupt tenant for unpaid and future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease.  This shortfall could adversely affect our cash flow and results of operations.

We face possible risks associated with the physical effects of climate change.  The physical effects of climate change could have a material adverse effect on our properties, and consequently on our operations and business.  For example, we have two Class A office buildings located in southern Florida; to the extent climate change causes changes in weather patterns, that geographic area could experience increases in storm intensity and rising sea-levels.  Over time, these conditions could result in declining demand for office space in our office buildings or our inability to operate the buildings at all.  Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, or by increasing the cost of energy at our properties.  There can be no assurance that climate change will not have a material adverse effect on our property, operations or business.

We depend upon personnel of our property managers.  We do not have any internal real estate management capacity.  We depend, and will depend in the future, on our property managers and their personnel to efficiently manage the day-to-day operations at certain of our properties; any difficulties our property managers encounter in hiring, training and retaining skilled personnel may adversely affect the income produced by our properties.

Risks Relating to Our Common Stock

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.

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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:

▪ may significantly dilute your equity interests;

▪ may require you to make an additional investment in us or suffer dilution of your equity interest;

▪ may subordinate the rights of holders of shares of our common stock if shares of preferred stock are issued with rights senior to those afforded to our common stock;

▪ could cause a change in control if a substantial number of shares of our common stock are issued;

▪ may affect, among other things, our ability to use our NOL carry forwards and could result in the resignation or removal of our present officers and directors; and

▪ may adversely affect prevailing market prices for our common stock.

Our common stock price may be volatile.  The trading price of our common stock may fluctuate substantially, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance.  These factors include, but are not limited to, the following:

▪ price and volume fluctuations in the overall stock market from time to time;

▪ significant volatility in the market price and trading volume of securities of our competitors;

▪ actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations or recommendations of securities analysts;

▪ material announcements by us or our competitors regarding business performance, financings, mergers and acquisitions or other transactions;

▪ general economic conditions and trends;

▪ legislative or regulatory changes affecting the businesses we invest in; or

▪ departures of key personnel.

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:

▪ authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;

▪ limiting the liability of, and providing indemnification to, our Board and officers;

▪ limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

▪ requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board;

▪ controlling the procedures for the conduct and scheduling of Board and stockholder meetings;

▪ limiting the ability for persons to acquire 4.99% or more of our common stock;

▪ providing our Board with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings;

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▪ limiting the determination of the number of directors on our Board and the filling of vacancies or newly created seats on the board to our Board then in office; and

▪ providing that directors may be removed by stockholders only for cause.

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.

Item 1B.  Unresolved Staff Comments.

None.

Item 2.  Properties.

We currently lease office space for our principal executive offices in Waltham, Massachusetts where our general corporate, investment management and real estate businesses operate.  Our lease is non-cancellable through September 2024.

In addition, we lease various facilities for our durable medical equipment businesses which are summarized in the table below and have various expiration dates between 2019 and 2026.  Certain office locations may also include warehouse and retail sales space.  Facilities in the Southwest region are primarily in Arizona; the Northwest region includes facilities in Alaska, Oregon and Washington and the Midwest region includes facilities in Iowa, Kansas and Nebraska.

Region	Type	Number of Facilities	Aggregate Square Footage
Southwest	Office - DME Inc. Headquarters	1		11,762
	Office	9		40,530
	Sleep Labs	8		22,473
Northwest	Office	7		32,451
Midwest	Office	5		21,502
	Sleep Labs	1		3,196

Real Estate Business

Through our real estate business we own 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 is fully-leased, on a triple-net basis, to a single tenant through March 31, 2030.  The Company does not have any operations at this location.

Item 3.  Legal Proceedings.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

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PART II

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

Market Information

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

Record Holders

As of August 26, 2019, there were 154 record holders of our common stock.

Dividends

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.

Restrictions on Ownership

We have significant NOL carryforwards and other tax attributes, the amount and availability of which are subject to qualifications, limitations and uncertainties.  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 the MAST Funds and Imperial Capital Asset Management, LLC (Imperial Capital).  As of the date of this report, the MAST Funds and their affiliates and Imperial Capital and its affiliates own approximately 7.9% and 8.9%, respectively, of the outstanding shares of our common stock.  Ownership information is based on information in publicly available filings.

Stock Purchases

None.

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Performance Graph

Based on $100 invested on June 30, 2014 in stock or index, including reinvestment of dividends through the fiscal year ended June 30, 2019.

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Item 6.  Selected Financial Data.

The following selected financial data should be read in conjunction with our consolidated financial statements and related notes thereto and with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The following table sets forth selected consolidated statements of operations, revised to reflect discontinued operations as of, and for the following fiscal years:

	For the years ended June 30,
(in thousands except per share data)	2019			2018			2017			2016			2015
Net revenues(1)	$	51,180		$	5,935		$	4,927		$	-		$	-
Cost of sales		17,261			-			-			-			-
Operating expenses		38,223			16,404			9,532			9,835			8,040
Operating income (loss) from continuing operations		(4,304	)		(10,469	)		(4,605	)		(9,835	)		(8,040	)
Loss from continuing operations, before income taxes		(9,050	)		(11,670	)		(18,650	)		(14,543	)		(12,032	)
Provision for (benefit from) income taxes		2,182			329			1,210			5,103			(164	)
Loss from continuing operations		(6,868	)		(11,341	)		(17,440	)		(9,440	)		(12,196	)
Discontinued operations:
Total income (loss) from discontinued operations, net of tax		3,736			(165	)		2,203			18,862			(29,563	)
Net income (loss)	$	(3,132	)	$	(11,506	)	$	(15,237	)	$	9,422		$	(41,759	)
Less: net loss attributable to non-controlling interest		(224	)		(439	)		(30	)		-			-
Net income (loss) attributable to Great Elm Capital Group, Inc.	$	(2,908	)	$	(11,067	)	$	(15,207	)	$	9,422		$	(41,759	)
Basic and diluted income (loss) per share
Continuing operations	$	(0.26	)	$	(0.45	)	$	(1.06	)	$	(1.00	)	$	(1.31	)
Discontinued operations		0.15			(0.01	)		0.13			2.00			(3.17	)
Net income (loss) per share	$	(0.11	)	$	(0.46	)	$	(0.93	)	$	1.00		$	(4.48	)
Shares used in computing basic and diluted income (loss) per share:		25,210			24,277			16,433			9,412			9,332

(1) Revenue for sales of products or services recognized in the year ended June 30, 2019 was accounted for under Topic 606, Revenue from Contracts with Customers, (Topic 606) and revenue for sales of products or services recognized in the previous years was accounted for under Topic 605, Revenue Recognition, as discussed in Note 2 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements.

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The following table sets forth selected consolidated balance sheets, revised to reflect discontinued operations as of, and for the following fiscal years:

	As of June 30,
(in thousands)	2019		2018		2017		2016		2015
Cash, cash equivalents and restricted cash	$	12,830	$	43,540	$	45,894	$	80,711	$	73,755
Investments(1)		17,110		18,172		20,886		-		11,713
Real estate assets, net		54,411		55,641		-		-		-
Property and equipment, net		1,367		41		41		-		110
Equipment held for rental, net		9,140		-		-		-		-
Identifiable intangible assets, net		17,576		9,400		4,102		-		-
Goodwill		50,397		-		-		-		-
Total assets		182,726		133,587		76,694		80,897		88,884
Liabilities related to discontinued operations		-		3,608		3,608		7,354		30,067
Lease liabilities(2)		6,533		1,640		2,061		-		-
Long term debt		63,794		57,631		3,174		33,786		29,874
Related party notes payable		30,368		3,224		-		-		-
Equipment financing debt		1,475		-		-		-		-
Stockholders' equity		65,082		64,586		66,216		36,821		23,504

(1) Includes short and long-term investments.

(2) For accounting principles generally accepted in the United States of America (US GAAP) reporting purposes, we implemented ASC 842, Leases, effective July 1, 2016, utilizing practical expedients related to contracts containing leases in the years prior to June 30, 2017.  As a result, no adjustment has been made to the balance sheet data as presented as of June 30, 2016 and 2015 not presented in the accompanying consolidated financial statements.

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 following discussion and analysis omits discussion of fiscal year 2017.  Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018 for a discussion of fiscal year 2017.

Overview

We are a holding company seeking to acquire assets and businesses, where our people and other assets provide a competitive advantage.  We currently have four business operating segments: durable medical equipment, investment management, real estate, and general corporate.

For additional information see “Item 1. Business.”

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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 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.

Accounts Receivable

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.

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.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under US GAAP.  This includes the Company’s contingent consideration liability related to the initial durable medical equipment acquisition which is fair valued using unobservable inputs, including volatility, weighted-average cost of capital and related EBITDA forecasts of the acquired businesses.  These unobservable inputs are classified as level 3 under the fair value hierarchy within US GAAP.

Goodwill

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.  We perform our annual impairment test on the first day of the fiscal fourth quarter.  The Company’s $50.4 million of goodwill was acquired in conjunction with the acquisitions of the durable medical equipment businesses during the fiscal year ended June 30, 2019 and at the time of recognition the fair value of such goodwill was equal to its carrying value.  This goodwill has been recorded within our durable medical equipment reporting unit.  Based on our annual impairment test as of April 1, 2019 the fair value of the durable medical equipment reporting unit exceeded the carrying value by 14.5% 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 14.0%.

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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.

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.  Due to the fact that we do not typically perform credit checks on patient customers aside from verifying insurance coverage, 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 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, 2019, relating to prior periods.

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

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.

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.

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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.  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 when considered probable of payment, which is generally when paid.

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, 2019, 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.

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.  The estimate of net unbilled rental revenue recognized is based on historical trends and estimates of future collectability.

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; as follows:

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.  Management fees are billed quarterly in arrears.

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Incentive Fees

The Company earns incentive fees based on the investment management agreements GECM has with GECC 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.  Incentive fees are recognized 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% to 20.0%.  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.

Administration Fees

The Company earns administration fees based on the administration agreement GECM has with GECC whereby GECC reimburses GECM for costs incurred in performing administrative functions for GECC.  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 that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis.

Real Estate Revenue

Rental Revenue

Consistent with the leases of durable medical equipment, the Company recognizes rental revenue on a straight-line basis over the non-cancelable term of the lease.  Under the terms of the lease, the Company may recover from the tenant certain expenses, including: insurance and other operating expenses.  For all expenses that are paid by the Company and reimbursed by the tenant, the recovery of these expenses is recognized in rental income in the accompanying consolidated statements of operations, in the same periods as the expenses are incurred.  These expenses recognized in both revenue and expense may fluctuate from period to period based on actual expense amounts.

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 expected 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 NOL carryforwards and other deferred tax assets is more likely than not.

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.

27

Business Combinations

Business combinations are accounted for at fair value. 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.

Results of Operations

The following discussion is reflective of our four business operating segments: durable medical equipment, investment management, real estate and general corporate.  Real estate and durable medical equipment commenced operations in March and September 2018, respectively.  Correspondingly, the results of operations for the period ended June 30, 2019 for each of these segments is not comparable to the corresponding periods ended June 30, 2018.

The following table provides the results of our consolidated operations for the years ended June 30, 2019, 2018 and 2017:

	For the years ended June 30,
	2019			Percent Change			2018			Percent Change			2017
Revenue:
Total revenue	$	51,180			762	%	$	5,935			20	%	$	4,927
Operating costs and expenses:
Cost of goods sold		(11,463	)		100	%		-			-	%		-
Cost of rentals		(5,798	)		100	%		-			-	%		-
Other selling, general and administrative		(34,540	)		126	%		(15,280	)		66	%		(9,192	)
Depreciation and amortization		(3,683	)		228	%		(1,124	)		231	%		(340	)
Total operating expenses		(55,484	)					(16,404	)					(9,532	)
Operating income (loss)		(4,304	)					(10,469	)					(4,605	)
Other income (expense):
Interest expense		(6,250	)		484	%		(1,071	)		(83	)%		(6,321	)
Other income (expense)		1,504			(1257	)%		(130	)		(98	)%		(7,724	)
Total other expense, net		(4,746	)					(1,201	)					(14,045	)
Total pre-tax income (loss) from continuing operations	$	(9,050	)				$	(11,670	)				$	(18,650	)

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Revenues

Revenues for the year ended June 30, 2019 included $41.9 million from the durable medical equipment business, $3.8 million from the investment management business and $5.5 million from the real estate business, while revenues for the year ended June 30, 2018 included $4.1 million from the investment management business and $1.9 million from the real estate business.  Revenues from the year ended June 30, 2017 included $4.9 million from the investment management business.  The increase in total revenue for the year ended June 30, 2019 as compared to the years ended June 30, 2018 and June 30, 2017 are primarily attributable to the acquisition of the real estate business in the third quarter of fiscal year 2018 and the acquisition of the durable medical equipment business in the first quarter of fiscal year 2019.

Operating costs and expenses

The increase in operating costs for the year ended June 30, 2019 as compared to the year ended June 30, 2018 is primarily attributable to the additional costs associated with the durable medical equipment business, including cost of goods sold and cost of rentals, as well as the general and administrative costs of the durable medical equipment business, depreciation on fixed assets and amortization of the intangible assets associated with the durable medical equipment business.  The increase in operating costs for the year ended June 30, 2018 as compared to the year ended June 30, 2017 is primarily attributable to increased compensation costs in connection with the investment management business.  In addition, for the year ended June 30, 2017, the general corporate business received a one-time reimbursement associated with the formation of GECC of approximately $3.0 million resulting in lower expenses for that year.

Other income (expense)

Interest expense increased for the year ended June 30, 2019 as compared to the year ended June 30, 2018 due to increased borrowings related to our acquisitions in the third quarter of fiscal year 2018 and in the first quarter of fiscal year 2019.  Interest expense decreased for the year ended June 30, 2018 as compared to the year ended June 30, 2017 due to additional costs incurred in retiring senior notes during the 2017 fiscal year.  Other income and expense primarily consisted of dividend income and unrealized gains or losses on the Company’s investment in GECC and interest income earned on cash balances.

Durable Medical Equipment

The key metrics of our durable medical equipment business include:

▪ Patients and setup growth – which drives revenue growth and takes advantage of scalable operations

▪ Earnings before interest, taxes, depreciation and amortization (EBITDA)

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The following table provides the results of our durable medical equipment business for the period from its inception in September 2018 to June 30, 2019 (the DME inception period).  We began to operate the durable medical equipment business in September 2018 and thus there are no comparable results prior to that date.

(in thousands)	For the period September 7, 2018 to June 30, 2019
Revenue:
Total revenue	$	41,880
Operating costs and expenses:
Cost of goods sold		(11,463	)
Cost of rentals		(5,798	)
Transaction costs		(551	)
Other selling, general and administrative		(20,260	)
Depreciation and amortization		(1,323	)
Total operating expenses		(39,395	)
Operating income (loss)		2,485
Other income (expense):
Interest expense		(3,415	)
Other income (expense)		(177	)
Total other expense, net		(3,592	)
Total pre-tax income (loss) from continuing operations	$	(1,107	)

Durable Medical Equipment Revenue

For the DME inception period, durable medical equipment revenue consisted of $27.3 million in sales of medical equipment and sleep study services and $14.6 million in rentals of medical equipment.

Durable Medical Equipment Costs and Expenses

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.  For the DME inception period, cost of rentals included $5.6 million of depreciation on medical equipment held for lease with the remaining costs related to maintenance expenses.

Other selling, general and administrative expenses for the DME inception period included approximately $14.4 million of payroll and related costs, $1.5 million of rental expenses associated with facility and equipment leases, and other administrative costs.  In addition, the Company incurred transaction costs of $0.6 million for the DME inception period in connection with the acquisition of the durable medical equipment businesses.  Depreciation and amortization includes the depreciation of 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.

In addition to the operating costs and expenses, we recognized interest expense of $3.4 million for the DME inception period.  Other income (expense) for the DME inception period ended June 30, 2019 includes dividend income of $0.7 million and realized loss of $0.9 million for the portion of the investment in GECC which had been restricted in connection with the Great Elm DME Holdings, Inc. (DME Holdings) preferred shares issued at inception of the durable medical equipment business in September 2018 (see Note 13 - Non-Controlling Interests and Preferred Stock of Subsidiary in the accompanying Notes to the Consolidated Financial Statements).  In addition, management and monitoring expenses, which are payable to Great Elm DME Manager, LLC (DME Manager), a subsidiary of the Company in the general corporate segment, and one of the former owners of the durable medical equipment businesses, are included in other expense.

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Investment Management

The key metrics of our investment management business include:

▪ Assets under management ― which provides the basis on which our management fees and performance milestones for vesting of certain equity awards are based

▪ Investment performance ― on which our incentive fees (if any) are based and on which we are measured against our competition

The following table provides the results of our investment management business for the years ended June 30, 2019 and 2018:

	For the years ended June 30,
(in thousands)	2019			Percent Change			2018
Revenue:
Total revenue(1)	$	3,841			(6	)%	$	4,085
Operating costs and expenses:
Stock-based compensation		(521	)		(85	)%		(3,487	)
Consulting agreement		(763	)		11	%		(688	)
Other general and administrative		(2,741	)		(32	)%		(4,031	)
Depreciation and amortization		(631	)		8	%		(585	)
Total operating expenses		(4,656	)					(8,791	)
Operating income (loss)		(815	)					(4,706	)
Other income (expense):
Interest expense		(180	)		(17	)%		(217	)
Other income (expense)		-			(100	)%		13
Total other expense, net		(180	)					(204	)
Total pre-tax income (loss) from continuing operations	$	(995	)				$	(4,910	)

⁽¹⁾ Investment management revenues are net of incentive fee reversals determined based upon a hypothetical liquidation of net assets at period end.  The incentive fee reversals are primarily related to the conversion of Avanti Communications Group plc (Avanti) third lien notes, an investment owned by GECC, to common equity.

Investment Management Revenue

Investment management revenues include management fees and administration fees related to the management of GECC.  For the year ended June 30, 2018, investment management revenues also included incentive fees from the management of GECC.  As a result of the adoption of Topic 606 on July 1, 2018, incentive fees were not recognized for the year ended June 30, 2019.  See Note 2 – Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.

For the years ended June 30, 2019 and 2018, we recognized $3.0 million and $2.6 million, respectively, of management fee revenue and $0.9 million and $1.3 million, respectively, of administration fee revenue.  The increase in management fee revenue for the year ended June 30, 2019 as compared to the year ended June 30, 2018 is primarily attributable to an increase in the average assets on which such fees are calculated.  Administration fees for the year ended June 30, 2018 included one-time costs associated with organizational restructuring and staffing changes at the Company which increased the costs on which the administration fees are based.

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Investment Management Costs and Expenses

Other general and administrative costs consist primarily of payroll and related costs, excluding stock-based compensation, professional fees, facilities and other overhead costs.  For the years ended June 30, 2019 and 2018, facilities costs were $0.2 million and $0.3 million, respectively.  The year over year decrease is primarily attributable to the Company moving to lower cost office space in October of 2017, as well as growth of the general corporate business resulting in lower allocation of shared expenses for the investment management business.  Other overhead costs have remained consistent at approximately $0.3 million for each year.

Professional fees were less than $0.1 million for the year ended June 30, 2019; however, for the year ended June 30, 2018, professional fees were $0.2 million as a result of non-recurring costs incurred in connection with the September 2017 separation from MAST Capital (MAST Separation).

For the years ended June 30, 2019 and 2018, payroll and related costs, excluding stock-based compensation, were approximately $2.3 million and $3.2 million, respectively.  The decrease in payroll and related costs for the year ended June 30, 2019 as compared to the year ended June 30, 2018 is primarily attributable to the growth of the Company resulting in approximately $0.8 million in allocations of certain management personnel costs to the other business segments.

The decrease in stock-based compensation for the year ended June 30, 2019 as compared to the year ended June 30, 2018 is primarily attributable to certain non-recurring costs recognized in connection with the MAST Separation. These non-recurring costs include:

▪ the elimination of the vesting provisions and call rights for the GECC GP Corp. stock owned by certain employees of the Company resulting in stock-based compensation expense equal to the estimated fair value of the non-controlling interest in GECC GP Corp. held by those employees of $1.5 million; and

▪ the restructuring of compensation arrangements for remaining employees resulting in higher stock-based compensation awarded in lieu of reductions in salaries for those employees.  For the year ended June 30, 2019 these increases were partially offset by reversals of previously accrued stock-based compensation due to updated estimates related to the vesting criteria for certain performance-based awards.

GECM has 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 increase in the costs associated with this consulting agreement for the years ended June 30, 2019 and 2018 are consistent with the corresponding increases in management fee revenue for the same periods.

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Real Estate

The key metrics of our real estate business include rental revenues, depreciation on rental properties and interest expense on the related debt.

The following table provides the results of our real estate business for the year ended June 30, 2019 and the period from its inception in March 2018 to June 30, 2018 (the RE inception period):

(in thousands)	For the year ended June 30, 2019			Percent Change			For the period March 6, 2018 to June 30, 2018
Revenue:
Total revenue	$	5,459			195	%	$	1,850
Operating costs and expenses:
General and administrative		(884	)		136	%		(375	)
Depreciation and amortization		(1,729	)		221	%		(538	)
Total operating expenses		(2,613	)					(913	)
Operating income (loss)		2,846						937
Other income (expense):
Interest expense		(2,655	)		211	%		(854	)
Other income (expense)		-			-	%		-
Total other expense, net		(2,655	)					(854	)
Total pre-tax income (loss) from continuing operations	$	191					$	83

Real Estate Revenue

For the year ended June 30, 2019 and the RE inception period, we recognized $5.5 million and $1.9 million of rental revenue in connection with our recently acquired Class A office buildings in Fort Myers, Florida.  The increase in revenue is due to having a full year of operations for the year ended June 30, 2019 as compared to approximately four months for the RE inception period.

Real Estate Costs and Expenses

Our real estate business’ costs primarily consist of management fees, insurance and state sales tax, depreciation of real estate assets and the amortization of the in-place lease intangible assets.  For the year ended June 30, 2019 and the RE inception period depreciation was $1.2 million and $0.4 million, respectively, and amortization was $0.5 million and $0.2 million, respectively.  In addition, we incurred $2.7 million and $0.9 million, respectively, of interest expense in connection with the Senior Note and Subordinated Note (each as defined herein) for the year ended June 30, 2019 and the RE inception period.  Increases in the current year as compared to the prior period are due to having a full year of operations.

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General Corporate

The following table provides the results of our general corporate business for the years ended June 30, 2019 and 2018:

	For the years ended June 30,
(in thousands)	2019			Percent Change			2018
Revenue:
Total revenue	$	123			100	%	$	-
Operating costs and expenses:
Stock-based compensation		(457	)		(51	)%		(938	)
Transaction costs		(1,582	)		39	%		(1,136	)
Other general and administrative		(6,904	)		49	%		(4,625	)
Depreciation and amortization		-			(100	)%		(1	)
Total operating expenses		(8,943	)					(6,700	)
Operating income (loss)		(8,820	)					(6,700	)
Other income (expense):
Interest expense		-			-	%		-
Other income (expense)		1,682			(1276	)%		(143	)
Total other income (expense), net		1,682						(143	)
Total pre-tax income (loss) from continuing operations	$	(7,138	)				$	(6,843	)

General Corporate Revenue

For the year ended June 30, 2019, all revenue was derived from fees earned by DME Manager, which provides consulting services to DME Inc.  Both DME Manager and DME Inc. were formed in connection with the acquisition of the durable medical equipment businesses in September 2018 and there was no corresponding activity prior to this acquisition.

General Corporate Costs and Expenses

Our general and administrative costs primarily consisted of professional fees, payroll and facility 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.  For the years ended June 30, 2019 and 2018, professional fees in relation to the diligence of such opportunities were $1.6 million and $1.1 million, respectively.  The increase in such professional fees for the year ended June 30, 2019 as compared to the year ended June 30, 2018 was primarily driven by the significant acquisition of our durable medical equipment business in September 2018.

The increase in other general and administrative costs for the year ended June 30, 2019 as compared to the prior year was primarily driven by an increase of approximately $1.0 million in professional fees for external audit and other accounting advisory services and approximately $0.6 million in additional payroll and related costs, excluding stock-based compensation.  The increases in payroll and related costs were partially offset by the $0.5 million reduction in stock-based compensation for the year ended June 30, 2019 as compared to the year ended June 30, 2018.

Other Income (Expense)

Other income and expense primarily consisted of dividend income and unrealized gains or losses on the Company’s investment in GECC and interest income earned on cash balances.  Dividend income for the years ended June 30, 2019 and 2018 was $1.7 million and $2.4 million, respectively.  During the year ended June 30, 2019, a portion of the Company’s investment in GECC had been allocated to the durable medical equipment segment due to collateral requirements of the related party qualified preferred shares issued by DME Holdings in connection with the acquisition of the durable medical equipment businesses.  This resulted in a decrease of $0.6 million in dividend income for the year ended June 30, 2019 as compared to the dividend income for the year ended June 30, 2018.

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We recognized unrealized losses of $0.2 million and $2.7 million, respectively, for the years ended June 30, 2019 and 2018.  We mark-to-market our investment in GECC by reference to the closing price of GECC common stock on Nasdaq as of each period end.

Income Taxes

Although in the aggregate we expect to owe no federal taxes for the year ended June 30, 2019, we are required to provide intra period taxes allocated between continuing operations and discontinued operations.  During 2019, the Company recognized an income tax benefit with respect to discontinued operations of $1.3 million related to intraperiod allocations.  In addition, the Company recognized an income tax benefit with respect to deferred tax liabilities of $0.9 million acquired in the durable medical equipment acquisition. State and local taxes were approximately $0.1 million for the year ended June 30, 2019.

Summary of Discontinued Operations

On June 30, 2016, the Company sold two of its previously wholly-owned subsidiaries (the Divestiture) engaged in the patent licensing business for an aggregate purchase price of up to $40 million.  The purchaser paid the Company $30 million, plus certain adjustments, upon the closing of the Divestiture, and had made claims that it had incurred indemnifiable losses in excess of the remaining $10 million due under the purchase and sale agreement.  

On January 21, 2019, we entered into a mutual release and settlement agreement with the purchaser resulting in the release of any indemnifiable liabilities and an incremental cash receipt of $1.5 million.  Prior to the execution of this settlement, the Company had determined that a loss related to final settlement with the purchaser was not realizable or estimable, and therefore had not accrued for any losses; however, the recognition of a portion of proceeds received associated with the former patent licensing business had been deferred pending finalization of all contingencies.  The settlement resulted in a $5.0 million gain in discontinued operations during the year ended June 30, 2019, consisting of the extinguishment of related liabilities of $3.6 million and the receipt of cash of $1.5 million from the purchaser, partially offset by legal fees of $0.1 million.  The net income from discontinued operations includes these gains, offset by a tax provision of $1.3 million for the year ended June 30, 2019.

The following table provides a reconciliation of the Company’s discontinued operations for the years ended June 30, 2019 and 2018:

	For the years ended June 30,
(in thousands)	2019			2018
Discontinued operations:
Net revenue	$	1,500		$	-
Extinguishment of liabilities related to discontinued operations		3,608			-
General and administrative expenses(1)		(87	)		(165	)
Pretax gain (loss) from discontinued operations		5,021			(165	)
Income tax benefit (expense)		(1,285	)		-
Net gain (loss) from discontinued operations	$	3,736		$	(165	)

⁽¹⁾ During the year ended June 30, 2018, we incurred discontinued operating costs of $0.2 million related to the representations and warranties associated with the disposal of our legacy patent licensing business.

Net Revenues

As a result of the settlement during the year ended June 30, 2019, we recognized $1.5 million in net revenues for the period.  There were no revenues related to discontinued operations for the year ended June 30, 2018.

Extinguishment of Liabilities

As a result of the settlement during the year ended June 30, 2019, $3.6 million of liabilities related to the discontinued operations were extinguished.

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General and Administrative Expenses

During the years ended June 30, 2019 and 2018, the general and administrative expenses of our discontinued operations related primarily to the work associated with settling claims on the representations and warranties in connection with the Divestiture.

Liquidity and Capital Resources

The following table presents selected financial information and statistics as of June 30, 2019 and 2018:

	As of June 30,
(in thousands)	2019		2018
Current Assets	$	42,400	$	63,594
Current Liabilities		18,068		8,510
Working Capital	$	24,332	$	55,084
Long Term Liabilities	$	95,664	$	60,491

	For the years ended June 30,
(in thousands)	2019			2018
Cash provided by (used in) operating activities	$	2,691		$	(3,845	)
Cash provided by (used in) investing activities		(54,903	)		(2,368	)
Cash provided by (used in) financing activities		21,502			3,859
Net increase (decrease) in cash and cash equivalents	$	(30,710	)	$	(2,354	)

Working Capital and Cash Flows

As of June 30, 2019, we had a cash balance of $12.1 million.  We also own 1,966,667 shares of GECC common stock with an estimated fair value of $17.1 million as of June 30, 2019.

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 $2.7 million for the year ended June 30, 2019.  Cash flows used in operating activities totaled $3.8 million for the year ended June 30, 2018.

For the year ended June 30, 2019, net cash provided by operating activities for continuing operations consisted primarily of the net loss of $3.1 million and gain on discontinued operations of $3.7 million offset by non-cash activity, including $9.2 million of depreciation and amortization.  Changes in operating assets and liabilities resulted in net cash used in operating activities of $3.0 million, primarily consisting of an increase in accounts receivable of $2.8 million and decrease in operating leases of $1.1 million offset by increases in related party payables of $0.8 million.  These changes in operating assets and liabilities are primarily related to operational changes as a result of the acquisition of our durable medical equipment businesses during the year.

For the year ended June 30, 2018, net cash used in operating activities consisted primarily of the following revenues and expenses: $4.1 million of investment management revenue received; $1.9 million of real estate revenue received; $4.3 million of cash based compensation and benefits paid to our employees; $1.4 million of costs incurred in the investigation and diligence of acquisition opportunities; $1.7 million of professional fees incurred; $0.4 million of real estate administrative expenses; $0.7 million of consulting fees and $0.8 million of rental and insurance expenses.

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Cash Used in Investing Activities.  Cash flows used in investing activities totaled $54.9 million and $2.4 million for the years ended June 30, 2019 and 2018, respectively.  For the year ended June 30, 2019 investing activities primarily consist of $48.1 million spent in the acquisitions of our durable medical equipment businesses in September 2018 and June 2019, as well as the purchase of $6.8 million in equipment held for rental and another $0.8 million in fixed assets related to the durable medical equipment business.

For the year ended June 30, 2018, investing activities primarily relate to the acquisition of our initial real estate assets.

Cash Provided by Financing Activities.  Cash flows provided by financing activities totaled $21.5 million and $3.9 million for the years ended June 30, 2019 and 2018, respectively. For the year ended June 30, 2019, cash inflows of approximately $19.9 million and $6.6 million were provided by net proceeds on the note payable from a seller and a revolving line of credit, respectively, established with the acquisition of the durable medical equipment business, including additional draws made during the year. Additionally, $1.6 million was provided by proceeds from equipment financing arrangements and $1.4 million was provided by the exercise of warrants in July 2018.  These inflows were partially offset by principal payments of $2.8 million on our long term debt and related party notes payable, as well as $5.1 million paid to redeem the preferred stock of a subsidiary during the year ended June 30, 2019.

For the year ended June 30, 2018, financing activities primarily related to the exercise of warrants resulting in cash proceeds of $4.6 million and the issuance of 1,266,000 shares of our common stock.  This cash inflow was partially offset by payments made on the Senior Note payable related to our real estate business of $0.6 million.

Borrowings

As of June 30, 2019, we had a note due to a non-controlling interest holder of DME Inc., Corbel Capital Partners SBIC, L.P., totaling $27.6 million that accrues interest at a rate of three-month LIBOR plus 10.0% (at June 30, 2019, the effective interest rate was 12.32%) through maturity on August31, 2023 (the Corbel Facility).  The Corbel Facility requires quarterly interest payments along with principal payments of $0.3 million plus an additional amount based on excess cash flows, if any, generated by the durable medical equipment business operations.  The Corbel Facility is secured by all of the assets of the durable medical equipment business and the Company is required to meet certain financial covenants.

The Company has the option to prepay the borrowings outstanding under the Corbel Facility in whole or in part subject to certain prepayment penalties ranging from 1.0% - 5.0% of the early payment of the principal, based on the time that the Corbel Facility has been outstanding through the first five years of the loan.

DME Inc. is required to pay to Corbel, as agent of the Corbel Facility, a quarterly monitoring fee of $25,000 per quarter while the borrowings remain outstanding.  In addition, if the borrowing is repaid with proceeds of debt in full or in part at any time within the first three years from the date of issuance, the borrower shall pay an additional fee to the agent, ranging from 2.10% to 3.50% depending on the date of repayment based on the period outstanding, of the aggregate repaid principal amount.

As of June 30, 2019, we had a credit facility due to Pacific Mercantile Bank totaling $7.4 million that accrues interest at the prime rate plus 0.40% (at June 30, 2019, the effective rate was 5.90%) through maturity on August 30, 2020 (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 Corbel Facility and DME Revolver each include 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.  Events of default include the failure to pay amounts when due, bankruptcy, or violation of covenants, including a change in control of DME Inc.  DME Inc. must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the DME Inc. EBITDA levels.

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As of June 30, 2019, we had a related party note due to MAST Capital (the GP Corp. Note) totaling $3.1 million that accrues interest at a variable rate of three-month LIBOR plus 3.0%, as adjusted for each 90-day period (at June 30, 2019, the effective rate was 5.32%) through maturity on November 3, 2026.  The GP Corp. Note requires minimum annual principal payments of $0.08 million and quarterly interest-only payments.  The GP Corp. Note is secured by the profit sharing agreement between GECM and GECC GP Corp. (the Profit Sharing Agreement) that transfers profits generated by our management of GECC, with no recourse to any of our other assets, entities or operations.

The GP Corp. Note is non-recourse to any of the Company’s operations or net assets not related to GECM’s management services to GECC.  The GP Corp. Note may be prepaid at par value at any time with prior written notice to the holders of the GP Corp. Note.  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.

As of June 30, 2019, we had a senior note due to Wells Fargo Bank Northwest, National totaling $52.2 million that accrues interest at a rate of 3.49% through maturity on March 15, 2030 (the Senior Note).  The Senior Note requires monthly principal and interest payments through the maturity date.  The Senior Note is secured by a first lien mortgage on the Property and an Assignment of Leases and Rents, with no recourse to any of our assets, entities or operations.

The principal and interest due on the Senior Note may be prepaid at the option of the borrower, based on an amount determined by discounting the remaining principal and interest payments at a rate equal to an applicable premium in excess of a rate corresponding to the specified U.S. Treasury security over the remaining average life of the Senior Note.

As of June 30, 2019, we had a subordinated note due to Wells Fargo Bank Northwest, National totaling $3.3 million that accrues interest at a rate of 15.00% through maturity on March 15, 2030 (the Subordinated Note).  The Subordinated Note is a capital appreciation note, whereby the monthly interest is capitalized to the principal balance and due at maturity.  The Subordinated Note is secured by a second lien mortgage on the Property, and an Assignment of Leases and Rents, with no recourse to any of our assets, entities or operations.

The principal and interest due on the Subordinated Note may be prepaid at the option of the borrower, based on an amount determined by discounting the remaining principal and interest payments at a rate equal to an applicable premium in excess of a rate corresponding to the specified U.S. Treasury security over the remaining average life of the Subordinated Note.

The note agreements for both the Senior Note and the Subordinated Note include negative covenants that restrict the Company’s majority-owned subsidiary, CRIC IT Fort Myers LLC’s (the Property Owner) business operations to ownership and lease of the Property, limit additional indebtedness, require maintenance of insurance and other customary requirements related to the Property.  Events of default include non-payment of amounts when due, inability to pay indebtedness or material change in the business operations or financial condition of the Property Owner or the lease tenant that in the lender’s reasonable determination would reasonably be expected to materially impair the value of the Property, prevent timely repayment of the notes or performance of any material obligations under the note and related agreements.  The payments under the notes are also guaranteed on a full and several basis by the non-controlling interest holder of the Property Owner.  Both the Senior Note and Subordinated Note are non-recourse to the Company, but are secured by the Property, the rights associated with the leases and the stock owned by the Company in the Property Owner.

Beginning in April 2019, DME Inc’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%.  During the year ended June 30, 2019, the Company financed $1.6 million in inventory and equipment through such financing agreements.

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Contractual Obligations

Our contractual obligations as of June 30, 2019 are presented in the table below:

	Payments due by period
(in thousands)	Total		Less than 1 Year		1-3 years		3-5 years		More than 5 Years
Corbel Facility(1)	$	40,358	$	5,618	$	8,889	$	25,851	$	-
DME Revolver(2)		7,919		444		7,475		-		-
GP Corp. Note payable(3)		4,339		176		491		474		3,198
Senior Note payable		66,208		3,945		8,166		8,577		45,520
Subordinated Note payable		16,270		-		-		-		16,270
Operating Lease obligations		8,354		2,090		3,799		1,916		549
Equipment financing		1,476		1,374		102		-		-
Total Contractual Obligations	$	144,924	$	13,647	$	28,922	$	36,818	$	65,537

(1) Includes estimated interest based on an interest rate of 12.32%, the 3-month LIBOR plus 10%, as of June 30, 2019.

(2) Includes estimated interest based on an interest rate of 5.90%, the prime rate plus 0.40% as of June 30, 2019.

(3) Includes estimated interest based on an interest rate of 5.32%, the 3-month LIBOR plus 3% as of June 30, 2019.

Restrictions on Subsidiary Dividends

In the GP Corp. Note agreement, GECC GP Corp. agreed not to declare any dividends until the GP Corp. Note is satisfied.  In the Senior Note and Subordinated Note, the Property Owner is restricted from paying any dividends until such notes are satisfied.  The ability of DME Inc. to pay dividends is subject to compliance with the restricted payment covenants under the Corbel Facility and DME Revolver.

Off-Balance Sheet Obligations

As of June 30, 2019, 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.

New Accounting Pronouncements

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

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, our financial position is subject to different types of risk, including market risk.  Market risk is the risk that we will incur losses due to adverse changes in equity and bond prices, interest rates, credit events or currency exchange rates.  Management is responsible for identifying, assessing and managing market and other risks.

In evaluating market risk, it is important to note that a portion of our revenue is based on the market value of assets under management.  As noted in “Item 1A. Risk Factors,” declines in financial market values negatively impact our revenue and net income.

Our primary direct exposure to equity price risk arises from our investment in GECC shares.  Equity price risk as it relates to this investment represents the potential future loss of value that would result from a decline in the net asset value of GECC or the fair value of the equity securities.

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Additionally, we are exposed to interest rate risk through our GP Corp. Note and the Corbel Facility which have variable interest based on the 90-day LIBOR and our DME Revolver which has variable interest based on the prime rate.  A significant increase in the LIBOR or prime rate would result in increased interest expense related to these borrowings.

Item 8.  Financial Statements and Supplementary Data.

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

Per Rule 3-09 of Regulation S-X, the audited financial statements of GECC for the years ended December 31, 2018 and 2017 included in GECC’s registration statement on Form N-2 (File No.  333-227605), as amended, filed with the SEC on June 6, 2019 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 of GECC are also officers of GECM and Mr. Reed is our Chief Executive Officer as well as the Chief Executive Officer of GECC.  GECM serves as the investment advisor to GECC.

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

None.

Item 9A.  Controls and Procedures.

Disclosure Controls and Procedures

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 Securities Exchange Act of 1934, as amended (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 not effective due to the material weaknesses described below.

Management’s Report on Internal Control Over Financial Reporting

As permitted by guidance established by the SEC, management excluded the durable medical equipment (DME) businesses acquired on September 7, 2018 and June 12, 2019 from its annual assessment on internal control over financial reporting as of June 30, 2019. DME businesses acquired represented 48% and 82% of the Company's consolidated total assets and consolidated revenues, respectively, as of and for the year ended June 30, 2019.  

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.

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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, 2019 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 (COSO). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified deficiencies, specified below, in the principles associated with each component of the COSO framework that constituted material weaknesses either individually or in the aggregate.

Control Environment

We did not maintain an effective control environment to enable the identification and mitigation of risks of material accounting errors based on:

▪ An insufficient number of personnel with an appropriate level of US GAAP knowledge and experience to create the proper environment for effective internal control over financial reporting and to ensure that (i) there were adequate processes for oversight, (ii) there was accountability for the performance of internal control over financial reporting responsibilities, and (iii) corrective activities were appropriately applied, prioritized, and implemented in a timely manner.

▪ Our oversight processes and procedures that guide individuals in applying internal control over financial reporting were not adequate such that there is a reasonable possibility that a material misstatement of the Company’s financial statements will not be prevented or detected on a timely basis.

Risk Assessment

We did not design and implement an effective risk assessment, including: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to achieve these objectives, and (iii) identifying and assessing changes in the business that could impact our system of internal controls.

Control Activities

We did not design and implement effective control activities as the control activities did not adequately (i) address relevant risks, (ii) provide evidence of performance, (iii) provide appropriate segregation of duties, or (iv) operate at a level of precision to identify all potentially material errors.

Information and Communication

We did not generate and provide quality information and communication relating to communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control.

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Monitoring Activities

We did not design and implement effective monitoring activities as we did not maintain effective monitoring controls to ascertain whether the components of internal control are present and functioning.

The effectiveness of our internal control over financial reporting as of June 30, 2019 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm.

Changes in Internal Control

Although not included in the scope of Management’s Report on Internal Control Over Financial Reporting, as noted above, we are in the process of completing our initial assessment of the effectiveness of internal control over financial reporting for the DME businesses that were acquired during 2019 and have identified material weaknesses which we believe are consistent with those described above.

Other than the material weaknesses described above and impacts of the DME businesses acquisition, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation Plan and Status for Material Weaknesses in Internal Control over Financial Reporting

As previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2018, management concluded as of June 30, 2018 that these material weaknesses existed at that date. Our remediation efforts are ongoing.  We will continue our initiatives to implement and document policies, procedures, and effective internal controls. Remediation of the identified material weaknesses and the strengthening of our internal control environment will require a substantial effort throughout fiscal year 2020 and beyond, as necessary. We will test the ongoing operating effectiveness of the new and existing controls in future periods. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Management has been engaged in remediation efforts to address the material weaknesses throughout fiscal year 2019. We made enhancements to our control environment from various activities including the following:

▪ We made changes to finance personnel in the organization to ensure finance personnel have the appropriate experience, education, and training for key financial reporting and accounting positions, which included hiring a Chief Accounting Officer, a new Corporate Controller and an experienced technical accounting consultant.  Additionally, our Chief Accounting Officer was promoted to Chief Financial Officer. We have also hired additional accounting resources for the DME businesses, including a Vice President of Finance and experienced accounting staff.  We believe these changes will provide the requisite technical expertise and bandwidth to direct the design and implementation of an effective system of controls;

▪ We performed detailed reviews of financial records at our corporate headquarters and the operating company level for the purpose of identifying and correcting accounting errors. We will continue to enhance risk assessment procedures and conduct a comprehensive risk assessment to enhance overall compliance. Furthermore, management has begun to, and will continue to, assess our information technology control environment and adequacy of personnel, including responding to information technology risks appropriately;

▪ Weengageda newoutsidefirmtoassistmanagementin assessing control activities, includingidentifyinginternalcontrolgapsimpacting the Company’scorporate,investmentmanagement, and real estate businesses,enhancingthedesignandimplementationofinternalcontrols,andtestingtheoperatingeffectivenessofcertainofthesecontrols;

▪ We initiated a process to evaluate and design the additional controls required for the recently acquired DME businesses, including soliciting the assistance of an outside firm;

42

▪ We enhanced documentation of accounting policies and positions on technical accounting topics throughout theyear; and

▪ For the DME businesses, we have begun to integrate information systems within the acquired businesses and implement technology solutions to reduce manual processes and facilitate the design and implementation of an effective system of controls.

Our remediation activities are continuing. In addition to implementing and refining the above activities, we expect to engage in additional activities in the current year, including:

▪ Adding additional technical accounting resources at the DME businesses to enhance our control environment, including oversight processes, identification and accountability for the execution of internal control procedures, and institute any corrective actions for our newly acquired businesses;

▪ Continuingtoengageoutsideconsultantstoassistinthedesign,implementation,anddocumentationofinternalcontrolsthataddresstherelevantrisks,areproperlydesigned,andprovideforappropriateevidenceofperformanceof theinternalcontrol and perform tests of the operating effectiveness of our internal controls; and

▪ Assessingtheinformationsystemsofourexistingandacquiredbusinessestodetermineifthereareinternalcontrolgapsthatshouldbeaddressedinthegeneralinformationtechnologycontrolsandimplementinganyneededimprovementsforexistingsystemsandimplementingmoreextensiveinternalcontrolreportingpackagesforrecentlyacquiredbusinesses.

While we have made and expect to make additional improvements to our internal controls, we may determine that additional steps beyond those described above may be necessary to remediate the material weaknesses. While we intend to resolve all material control deficiencies discussed above, we cannot provide any assurance that these remediation efforts will be successful, will be completed quickly, or that our internal control over financial reporting will be effective because of these efforts by any particular date. We have not yet quantified the cost to implement our planned remediation activities related to our existing or recently acquired businesses.

43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Great Elm Capital Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Great Elm Capital Group, Inc. and subsidiaries (the “Company”) as of June 30, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, 2019, of the Company and our report dated September 27, 2019, expressed an unqualified opinion on those financial statements.

As described in Management’s Report of Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at the Durable Medical Equipment (“DME”) businesses acquired on September 7, 2018 and June 12, 2019. DME businesses acquired represented 48% and 82%, of the Company’s consolidated total assets and consolidated revenues, respectively, as of and for the year ended June 30, 2019. Accordingly, our audit did not include the internal control over financial reporting at the DME businesses.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (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 receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment:

Control Environment - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) an insufficient number of personnel with an appropriate level of GAAP knowledge and experience to create the proper environment for effective internal control over financial reporting and to ensure that (a) there were adequate processes for oversight, (b) there was accountability for the performance of internal control over financial reporting responsibilities, and (c) corrective activities were appropriately applied, prioritized, and implemented in a timely manner, and (ii) oversight processes and procedures that guide individuals in applying internal control over financial reporting were not adequate such that there is a reasonable possibility that a material misstatement of the Company’s financial statements will not be prevented or detected on a timely basis.

Risk Assessment - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to achieve these objectives, and (iii) identifying and assessing changes in the business that could impact the system of internal controls.

Control Activities - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) addressing relevant risks, (ii) providing evidence of performance, (iii) providing appropriate segregation of duties, or (iv) operation at a level of precision to identify all potentially material errors.

Information and Communication - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control.

Monitoring - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to monitoring activities to ascertain whether the components of internal control are present and functioning.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended June 30, 2019, of the Company, and this report does not affect our report on such financial statements.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

September 27, 2019

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Item 9B.  Other Information.

None.

PART III

Item 10.  Directors, Executive Officers and Corporate Governance.

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.

Item 11.  Executive Compensation.

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.

Item 14.  Principal Accounting Fees and Services.

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

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PART IV

Item 15.  Exhibits, Financial Statement Schedules.

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 15 by reference.

Financial Statement Schedules

Schedules, except for Schedule III on page S-1, 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.

Exhibits

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.

Item 16.  Form 10-K Summary.

We have elected not to provide a Form 10-K summary.

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EXHIBIT INDEX

Unless otherwise indicated, all references are to filings by Great Elm Capital Group, Inc. (the Registrant) with the Securities and Exchange Commission under File No.  001-16073

Exhibit No.	Description
2.1	Purchase and Sale Agreement, dated as of April 6, 2016, by and between the Registrant and Optis UP Holdings, LLC (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on April 7, 2016)
2.2	First Amendment to the Purchase and Sale Agreement, dated as of April 6, 2016, by and between the Registrant and Optis UP Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 25, 2016)
2.3	Agreement and Plan of Merger, dated as of June 23, 2016 by and between Great Elm Capital Corp. and Full Circle Capital Corporation (incorporated by reference to the Pre-Commencement Solicitation fled on June 27, 2016 by Great Elm Capital Corp. (File No. 814-01211))
2.4	Asset Purchase Agreement, dated as of November 3, 2016, by and between GECC GP Corp. and MAST Capital Management LLC (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on November 9, 2016)
2.5	Contract of Purchase and Sale, dated as of March 6, 2018, by and between IT Fort Myers Holdings LLC and Great Elm FM Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on March 6, 2018)
2.6	Transaction Agreement, dated as of September 7, 2018, by and among Corbel Capital Partners SBIC, L.P., NWMI Manager LLC, Valley Healthcare Holding, LLC and Great Elm DME Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on September 11, 2018)
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on November 15, 2013)
3.2	Certificate of Ownership and Merger merging Unwired Planet, Inc. with and into Openwave Systems Inc.  (incorporated by reference to Exhibit 3.3 to the Form 10-Q filed on May 10, 2012)
3.3	Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on January 5, 2016)
3.4	Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on January 11, 2016)
3.5	Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on June 16, 2016)
3.6	Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on October 17, 2017)
3.7	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Form 8-K filed on November 15, 2013)
4.1	Amended and Restated Form of the Registrant’s common stock certificate (incorporated by reference to Exhibit 4.1 to the Form 10-Q filed on May 15, 2018)
4.2	Amended and Restated Certificate of Designations of Series A Junior Participating Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-A filed on January 29, 2018)
4.3	Stockholders’ Rights Agreement, dated as of January 28, 2018, between the Registrant and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Form 8-A filed on January 29, 2018)
4.4	Securities Purchase Agreement by and between the Registrant and Indaba Capital Fund, L.P., dated June 28, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 2, 2013)
4.5	Description of Securities

48

Exhibit No.	Description
10.1	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))
10.2	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))
10.3	Profit Sharing Agreement, dated as of November 3, 2016, by and between Great Elm Capital Management, Inc. and GECC GP Corp. (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on November 9, 2016)
10.4	Senior Secured Note, dated November 3, 2016, by GECC GP Corp. in favor of MAST Capital Management LLC (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on November 9, 2016)
10.5	Form of Performance Stock Award (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on November 9, 2016) (1)
10.6	Subscription Agreement, dated as of June 23, 2016, by and among Great Elm Capital Corp., the Registrant, the investment funds signatory thereto, and MAST Capital Management LLC (incorporated by reference to the Pre-Commencement Solicitation filed on June 27, 2016 by Great Elm Capital Corp. (File No.  814-01211))
10.7	Amended and Restated Registration Rights Agreement, dated as of November 4, 2016, by and among Great Elm Capital Corp., the registrant, and the MAST Funds named therein (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on November 7, 2016 by Great Elm Capital Corp (File No.  814-01211))
10.8	Form of Indemnity Agreement for Officers and Directors (incorporated by reference to Exhibit 10.16 to Form 10-K filed on September 28, 2001) (1)
10.9	Form of US Stock Option Agreement (incorporated by reference to Exhibit 10.3 to the Form 10-Q filed on May 12, 2004) (1)
10.10	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) (1)
10.11	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) (1)
10.12	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) (1)
10.13	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 (File No.  333-163480) (1)
10.14	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 (File No.  333-163480)) (1)
10.15	Amended and Restated 2016 Long-Term Incentive Compensation Plan (incorporated by reference to Annex A to the Proxy Statement filed on September 20, 2018) (1)
10.16	2016 Employee Stock Purchase Plan (incorporated by reference to Annex E to the Proxy Statement filed on May 25, 2016) (1)
10.17	Amended and Restated Backstop Investment Agreement, dated as of October 13, 2016, by and among the Registrant and the investors named therein (incorporated by reference to Exhibit 10.1 to the Form S-1 filed on October 14, 2016 (File No.  333-213620))
10.18	Registration Rights Agreement, dated as of September 13, 2016, by and among the Registrant and the holders named therein (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on September 14, 2016)

49

Exhibit No.	Description
10.19	Separation Agreement, dated as of September 18, 2017, by and among the Registrant, Great Elm Capital Management, Inc., GECC GP Corp., the MAST Funds named therein, David J. Steinberg, Peter A.  Reed and Adam M.  Kleinman (incorporated by reference to Exhibit 10.29 to the Form 10-K filed on September 19, 2017)
10.20	Offer Letter, dated September 18, 2017,from the Registrant to Peter A. Reed (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on September 20, 2017) (1)
10.21	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) (1)
10.22	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) (1)
10.23	Amended and Restated Senior Secured Note, dated September 18, 2017, by and between GECC GP Corp. and MAST Capital Management, LLC (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on September 20, 2017)
10.24	Share Registration Agreement, dated September 18, 2017, by and between the Registrant and MAST Capital Management, LLC (incorporated by reference to Exhibit 10.9 to the Form 8-K filed on September 20, 2017)
10.25	Share Registration Agreement, dated September 18, 2017, by and between the Registrant and Northern Right Capital Management, L.P. (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on September 20, 2017)
10.26	Letter Agreement, dated September 18, 2017, by and between Great Elm Capital Management, Inc. and GECC GP Corp. (incorporated by reference to Exhibit 10.12 to the Form 8-K filed on September 20, 2017)
10.27	Offer Letter, dated March 31, 2018, by and between the Registrant and Adam M. Kleinman (incorporated by reference to Exhibit 10.41 to the Form 10-K filed on September 13, 2018) (1)
10.28	Offer Letter, dated May 9, 2019, by and between the Registrant and Brent J. Pearson (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on May 10, 2019) (1)
21.1	Subsidiaries of the Registrant.
23.1	Consent of Deloitte & Touche 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 Executive Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certifications of the Principal 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 pages F-33 to F-69 to the POS 8C filed on June 6, 2019 by Great Elm Capital Corp. (File No.  333-227605))
101.1INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Indicates a management contract or compensatory plan or arrangement.

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SIGNATURES

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 27, 2019.

GREAT ELM CAPITAL GROUP, INC.
By:	/s/ Peter A.  Reed
Name:	Peter A.  Reed
Title:	Chief Executive Officer

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 27, 2019.

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 P. Parmelee	Director
James P. Parmelee
/s/ Jeffrey S. Serota	Director
Jeffrey S. Serota
/s/ Mark A. Snell	Director
Mark A. Snell
/s/ Hugh Steven Wilson	Director
Hugh Steven Wilson

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INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at June 30, 2019 and 2018	F-3
Consolidated Statements of Operations for the years ended June 30, 2019, 2018 and 2017	F-4
Consolidated Statements of Stockholders’ Equity and Contingently Redeemable Non-Controlling Interest for the years ended June 30, 2019, 2018 and 2017	F-5
Consolidated Statements of Cash Flows years for the years ended June 30, 2019, 2018 and 2017	F-6
Notes to the Consolidated Financial Statements	F-8
Schedule III Real Estate and Accumulated Depreciation	S-1

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholdersand the Board of Directors of Great Elm Capital Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Great Elm Capital Group, Inc. and subsidiaries (the "Company") as of June 30, 2019 and 2018, and the related consolidated statements of operations, stockholders’ equity and contingently redeemable non-controlling interest, and cash flows for the each of the three years in the period ended June 30, 2019, and the related notes and the schedule listed in the Index at Item 15 (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, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 27, 2019, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses identified.

Basis for Opinion

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 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. 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 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.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

September 27, 2019

We have served as the Company's auditor since 2017.

F-2

GREAT ELM CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

Dollar amounts in thousands, except per share amounts

ASSETS	2019			2018
Current assets:
Cash and cash equivalents	$	12,122		$	42,962
Restricted cash		708			578
Accounts receivable		8,832			-
Current portion of related party receivables		1,421			1,338
Investments, at fair value (cost $30,000)		17,110			18,172
Inventories		1,336			-
Prepaid and other current assets		871			544
Total current assets		42,400			63,594
Related party receivables, net of current		-			2,919
Real estate assets, net		54,411			55,641
Property and equipment, net		1,367			41
Equipment held for rental, net		9,140			-
Identifiable intangible assets, net		17,576			9,400
Goodwill		50,397			-
Right of use assets		6,239			1,521
Other assets		1,196			471
Total assets	$	182,726		$	133,587
LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	5,158		$	32
Accrued expenses and other liabilities		3,951			2,535
Related party payables		1,940			-
Current portion of lease liabilities		1,423			336
Current portion of long term debt		2,159			1,999
Current portion of related party notes payable		2,066			-
Current portion of equipment financing debt		1,371			-
Liabilities related to discontinued operations		-			3,608
Total current liabilities		18,068			8,510
Lease liabilities, net of current portion		5,110			1,304
Long term debt, net of current portion		61,635			55,632
Related party notes payable, net of current portion		28,302			3,224
Equipment financing debt, net of current portion		104			-
Other liabilities		513			331
Total liabilities		113,732			69,001
Commitments and Contingencies
Contingently redeemable non-controlling interest		3,912			-
Stockholders' equity
Preferred stock, $0.001 par value; 5,000 authorized and zero outstanding		-			-
Common stock, $0.001 par value; 350,000,000 shares authorized and 26,086,086 shares issued and 25,352,989 outstanding at June 30, 2019; and 25,480,200 shares issued and 24,718,395 outstanding at June 30, 2018		25			25
Additional paid-in-capital		3,305,415			3,302,886
Accumulated deficit		(3,244,374	)		(3,238,547	)
Total Great Elm Capital Group, Inc. stockholders' equity		61,066			64,364
Non-controlling interests		4,016			222
Total stockholders' equity		65,082			64,586
Total liabilities, non-controlling interest and stockholders' equity	$	182,726		$	133,587

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

F-3

GREAT ELM CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Dollar amounts in thousands, except per share data

	For the years ended June 30,
	2019			2018			2017
Revenues:
Durable medical equipment sales and services revenue	$	27,298		$	-		$	-
Durable medical equipment rental income		14,582			-			-
Investment management revenues		3,841			4,085			4,927
Real estate rental income		5,459			1,850			-
Total revenues		51,180			5,935			4,927
Operating costs and expenses:
Cost of durable medical equipment sold and services		11,463			-			-
Cost of durable medical equipment rentals (includes depreciation expense of $5,550 for the year ended June 30, 2019)		5,798			-			-
Durable medical equipment other operating expenses		20,127			-			-
Investment management expenses		4,025			8,206			4,779
Real estate expenses		884			375			-
Depreciation and amortization		3,683			1,124			340
Selling, general and administrative		9,504			6,699			4,413
Total operating costs and expenses		55,484			16,404			9,532
Operating loss		(4,304	)		(10,469	)		(4,605	)
Dividends and interest income		2,565			2,579			1,306
Unrealized loss on investment in GECC		(1,062	)		(2,714	)		(9,114	)
Interest expense		(6,250	)		(1,071	)		(6,321	)
Other income, net		1			5			84
Loss from continuing operations, before income taxes		(9,050	)		(11,670	)		(18,650	)
Benefit from income taxes		2,182			329			1,210
Loss from continuing operations		(6,868	)		(11,341	)		(17,440	)
Discontinued operations:
Income (loss) from discontinued operations, net of tax		3,736			(165	)		2,203
Net loss	$	(3,132	)	$	(11,506	)	$	(15,237	)
Less: net income (loss) attributable to non-controlling interest		(224	)		(439	)		(30	)
Net income (loss) attributable to Great Elm Capital Group	$	(2,908	)	$	(11,067	)	$	(15,207	)
Basic income (loss) per share
Continuing operations	$	(0.26	)	$	(0.45	)	$	(1.06	)
Discontinued operations		0.15			(0.01	)		0.13
Net income (loss)	$	(0.11	)	$	(0.46	)	$	(0.93	)
Diluted income (loss) per share from:
Continuing operations	$	(0.26	)	$	(0.45	)	$	(1.06	)
Discontinued operations		0.15			(0.01	)		0.13
Net income (loss)	$	(0.11	)	$	(0.46	)	$	(0.93	)
Weighted average shares outstanding
Basic		25,210			24,277			16,433
Diluted		25,210			24,277			16,433

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

F-4

GREAT ELM CAPITAL GROUP, INC.

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 Capital Group Inc. Stockholders'			Non- controlling			Total Stockholders'			Contingently Redeemable Non-controlling
	Shares		Amount		Capital		Deficit			Equity			Interest			Equity			Interest
BALANCE, June 30, 2016		9,467	$	9	$	3,249,085	$	(3,212,273	)	$	36,821		$	-		$	36,821		$	-
Net loss		-		-		-		(15,207	)		(15,207	)		(30	)		(15,237	)		-
Acquisition of GP Corp.		-		-		-		-			-			20			20			-
Issuance of common stock in rights offering, net of issuance costs		13,701		12		42,635		-			42,647			-			42,647			-
Issuance of common stock related to vesting of restricted stock		32		2		-		-			2			-			2			-
Stock-based compensation		-		-		1,963		-			1,963			-			1,963			-
BALANCE, June 30, 2017		23,200		23		3,293,683		(3,227,480	)		66,226			(10	)		66,216			-
Net loss		-		-		-		(11,067	)		(11,067	)		(439	)		(11,506	)		-
Acquisition of CRIC IT Fort Myers LLC		-		-		-		-			-			671			671			-
Issuance of common stock in exchange for cancelling the MAST Warrants		55		0		207		-			207			-			207			-
Issuance of common stock related to warrants exercise		1,266		1		4,571		-			4,572			-			4,572			-
Issuance of common stock related to vesting of restricted stock		198		1		-		-			1			-			1			-
Stock-based compensation		-		-		4,425		-			4,425			-			4,425			-
BALANCE, June 30, 2018		24,719		25		3,302,886		(3,238,547	)		64,364			222			64,586			-
Net income (loss)		-		-		-		(2,908	)		(2,908	)		(171	)		(3,079	)		(53	)
Adoption of accounting standard (Note 2)		-		-		-		(2,919	)		(2,919	)		-			(2,919	)		-
Acquisition of Great Elm DME, Inc.		-		-		-		-			-			3,632			3,632			3,632
Acquisition of Midwest Respiratory Care, Inc.		-		-		-		-			-			333			333			333
Issuance of common stock related to warrants exercise		420		0		1,409		-			1,409			-			1,409			-
Issuance of common stock related to vesting of restricted stock		171		0		0		-			0			-			0			-
Issuance of common stock related to stock options exercise		44		0		142		-			142						142
Stock-based compensation		-		-		978		-			978			-			978			-
BALANCE, June 30, 2019		25,353	$	25	$	3,305,415	$	(3,244,374	)	$	61,066		$	4,016		$	65,082		$	3,912

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

F-5

GREAT ELM CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollar amounts in thousands

	For the years ended June 30,
	2019			2018			2017
Cash flows from operating activities:
Net loss	$	(3,132	)	$	(11,506	)	$	(15,237	)
(Gain) loss from discontinued operations		(3,736	)		165			(2,203	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		9,233			1,124			340
Stock-based compensation		978			4,425			1,963
Re-measurement of warrant liability		-			8			30
Unrealized loss on investments		1,062			2,714			9,114
Non-cash interest and amortization of debt issuance costs		877			245			2,802
Deferred tax benefit related to continuing operations		(2,266	)		148			-
Other non-cash expense, net		1,170			47			-
Gain on sale of equipment held for rental		(399	)		-			-
Change in fair value of contingent consideration		469			-			-
Changes in operating assets and liabilities:
Related party receivable		(83	)		(440	)		(3,817	)
Accounts receivable		(2,811	)		(197	)		-
Inventories		62			-			-
Prepaid assets, deposits, and other assets		(225	)		(117	)		(81	)
Operating leases		(1,075	)		(254	)		-
Related party payable		804			-			-
Accounts payable, accrued liabilities and other liabilities		350			(42	)		(1,860	)
Net cash provided by (used in) operating activities - continuing operations		1,278			(3,680	)		(8,949	)
Net cash provided by (used in) operating activities - discontinued operations		1,413			(165	)		(1,542	)
Net cash provided by (used in) operating activities		2,691			(3,845	)		(10,491	)
Cash flows from investing activities:
Acquisition of business, net of cash acquired		(48,124	)		-			(100	)
Asset Acquisition		-			(2,355	)		-
Purchases of equipment held for rental		(6,848	)		-			-
Proceeds from sale of equipment held for rental		878			-			-
Purchases of property and equipment		(809	)		(13	)		(35	)
Deconsolidation of GECC into equity method investment		-			-			(30,000	)
Net cash used in investing activities - continuing operations		(54,903	)		(2,368	)		(30,135	)
Net cash used in investing activities - discontinued operations		-			-			-
Net cash used in investing activities		(54,903	)		(2,368	)		(30,135	)

F-6

GREAT ELM CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Dollar amounts in thousands

	For the years ended June 30,
	2019			2018			2017
Cash flows from financing activities:
Proceeds on revolving line of credit		6,625			-			-
Principal payments on long term debt		(2,069	)		(637	)		-
Principal payments on related party notes payable		(768	)		(76	)		(36,838	)
Principal payments on equipment financing		(167	)		-			-
Proceeds from related party note payable		19,855			-			-
Proceeds from equipment financing		1,643			-			-
Debt financing costs		(488	)		-			-
Redemption of preferred stock of subsidiary		(5,052	)		-			-
Contingent consideration payment		(295	)		-			-
Proceeds from issuance of common stock, gross		1,551			4,572			45,000
Proceeds from funding by non-controlling interest		667			-			-
Payment of equity issuance costs		-			-			(2,353	)
Net cash provided by financing activities - continuing operations		21,502			3,859			5,809
Net cash provided by financing activities - discontinued operations		-			-			-
Net cash provided by financing activities		21,502			3,859			5,809
Net decrease in cash, cash equivalents and restricted cash		(30,710	)		(2,354	)		(34,817	)
Cash, cash equivalents and restricted cash at beginning of year		43,540			45,894			80,711
Cash, cash equivalents and restricted cash at end of year	$	12,830		$	43,540		$	45,894
Cash paid for interest	$	4,537		$	803		$	3,535
Non-cash investing and financing activities
Assumption of borrowings in connection with acquisition	$	9,275		$	58,016		$	-
Issuance of non-controlling interests in subsidiary in connection with acquisition		7,264			671			20
Issuance of related party note payable in acquisition		-			-			3,424
Preferred stock issued to seller in acquisition		5,266			-			-
Preferred stock cancelled and forfeited		215			-			-
Contingent consideration issued in connection with acquisition		961			-			-
Issuance of equity-linked instruments classified as warrant liability		-			-			216
Warrant liability settled with common stock issuance		-			194			-
Lease liabilities and right of use assets arising from operating leases		1,445			-			-

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

	June 30, 2019		June 30, 2018		June 30, 2017
Cash and cash equivalents		12,122		42,962		45,894
Restricted cash		708		578		-
Cash, cash equivalents and restricted cash		12,830		43,540		45,894

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

F-7

GREAT ELM CAPITAL GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Great Elm Capital Group, Inc. (referred to as the Company) is a holding company incorporated in Delaware.  The Company currently has four reportable segments: durable medical equipment, investment management, real estate and general corporate.  The Company is pursuing business development opportunities in durable medical equipment, investment management, real estate and other industries.

On September 27, 2016, the Company’s wholly-owned SEC-registered investment advisor subsidiary Great Elm Capital Management, Inc., a Delaware corporation (GECM), 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 Capital Corporation merged with and into GECC (the Merger), and GECM hired the employees of MAST Capital Management, LLC, a Delaware limited liability company (MAST Capital), to manage the assets of GECC.  Certain funds managed by MAST Capital own approximately 7.9% of the Company’s common stock.  Through the Company’s 80.1% owned subsidiary, GECC GP Corp. (GP Corp.), the Company acquired assets and assumed related liabilities associated with the on-going operations of GECM.  Approximately 5% of the 19.9% non-controlling interest of GP Corp. is owned by MAST Capital, and its affiliates and officers.

On September 7, 2018, the Company, through its majority-owned subsidiary, Great Elm DME Holdings, Inc. (DME Holdings), acquired an 80.1% equity interest in Great Elm DME, Inc. (DME Inc.) an entity formed to acquire and combine two companies Valley Healthcare Holding, LLC (Valley) 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.  On June 12, 2019, the Company expanded its durable medical equipment business through the acquisition of certain assets and liabilities of Midwest Respiratory Care, Inc. (Midwest).

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries.  Wholly-owned subsidiaries include Great Elm Capital Management, Inc. (GECM), Great Elm Opportunities GP, Inc., Great Elm FM Acquisition, Inc., DME Holdings and Great Elm DME Manager, LLC.  Majority-owned subsidiaries include GECC GP Corp., Great Elm FM Holdings, Inc., CRIC IT Fort Myers, LLC and DME Inc. and its seven wholly-owned subsidiaries.

2. 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, recognition of rental income, estimates for contractual allowances, estimates for allowance for doubtful accounts, 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.

F-8

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 13 – 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 and consolidated statements of comprehensive income (loss).

Segments

The Company has four reporting segments: durable medical equipment, investment management, real estate, and general corporate.  The Company regularly reviews each segment for purposes of allocating resources and assessing performance.

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.

The Company’s restricted cash consists of rental income received in advance and a portion of prior period rental income that is reserved for capital and certain operating expenses in connection with the Company’s real estate assets.

Accounts Receivable

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 revenue reserves related to constraints on variable consideration were $3.4 million as of June 30, 2019.  During the year ended June 30, 2019, the Company recognized a reduction to revenue of $1.7 million related to such constraints.  See Note 3 – Revenue.

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, 2019 relating to prior periods.  Changes in variable consideration are recorded as a component of net revenues.

F-9

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 the allowance for doubtful accounts is immaterial.

As of June 30, 2019, the Company had unbilled receivables of approximately $0.7 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 billable and are therefore contract assets.  Such contract assets are included in accounts receivable in the consolidated balance sheets.

Investments and Restricted Investments

Investments and restricted investments consist of shares in Great Elm Capital Corp. (GECC), which is carried at fair value.  Restricted investments would represent a portion of the Company’s investment in GECC, which has been contributed as part of a required capitalization for an outstanding obligation.  As of June 30, 2019, there were no outstanding obligations which would require the restriction of any investment.  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

Fair Value Measurements

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

Property, Equipment, Real Estate Assets 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.

Within the durable medical equipment businesses, the Company capitalizes the cost of equipment predominantly leased out to patient customers as such assets are acquired 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 as such assets are acquired 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.

F-10

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

Description	Life in Years
Real Estate Assets
Buildings	55
Site improvements	16
Tenant improvements	12
Property and Equipment
Leasehold improvements	lesser of 7 years or life of the lease
Vehicles	5
Sleep study equipment	5
Furniture and fixtures	1 to 5
Computer equipment and software	3
Rental Equipment
Medical equipment for lease	1 to 5

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 our estimates of forecasted net sales.  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 no significant write-offs during the year ended June 30, 2019.

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. 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.

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.

Long-lived Assets

Long-lived assets include real estate assets, 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.  No such impairment triggering events were identified in the periods presented.

Leases and Right of Use Assets

We determine if an arrangement is a lease at inception.  As of June 30, 2019, all of our leases are operating leases.  Operating leases are included in right of use assets (ROU), current portion of lease liabilities and lease liabilities net of current portion in the consolidated balance sheets.

F-11

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 commencement date in determining the present value of lease payments.  We use the implicit rate when readily determinable.  The ROU assets also includes 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, which are accounted for together as a single lease component.

At June 30, 2019, the majority of our lease liabilities and ROU assets were acquired with the durable medical equipment businesses as discussed in Note 4 – Acquisitions and the amounts disclosed on the consolidated balance sheet represent preliminary valuations.

Cost of Durable Medical Equipment Sold and Services

Cost of durable medical equipment sold and services includes 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 has a three year 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.

Real Estate Expenses

The Company classifies all direct expenses of its real estate segment including: insurance, property management fees and other operating expenses in real estate expense in the accompanying consolidated statements of operations.  Under the terms of the lease, the Company may recover from the tenant certain expenses including: insurance and other operating expenses; the recovery of these expenses is recognized in rental income in the accompanying consolidated statements of operations, in the same periods as the expenses are incurred.

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, which is based on its estimate of useful lives of the assets.

F-12

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.

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.

Business Combinations 

Business combinations are accounted for at fair value. 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.

F-13

Net Income (Loss) Per Share

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

	For the years ended June 30,
	2019			2018			2017
Loss from continuing operations	$	(6,868	)	$	(11,341	)	$	(17,440	)
Income (loss) from discontinued operations, net of tax		3,736			(165	)		2,203
Net income (loss)	$	(3,132	)	$	(11,506	)	$	(15,237	)
Less: net loss attributable to non-controlling interest		(224	)		(439	)		(30	)
Net income (loss) attributable to Great Elm Capital Group	$	(2,908	)	$	(11,067	)	$	(15,207	)
Weighted average shares basic and diluted:
Weighted average shares of common stock outstanding		25,210			24,277			16,433
Weighted average shares used in computing income (loss) per share		25,210			24,277			16,433
Basic and diluted income (loss) per share from:
Income (loss) from continuing operations	$	(0.26	)	$	(0.45	)	$	(1.06	)
Income (loss) from discontinued operations		0.15			(0.01	)		0.13
Net income (loss)	$	(0.11	)	$	(0.46	)	$	(0.93	)

As of June 30, 2019, 2018 and 2017, the Company had 3,438,353, 3,443,979, and1,923,279 potential shares of Company common stock, respectively, that are not included in the diluted net income (loss) per share calculation because to do so would be antidilutive.

As of June 30, 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.  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

In the GP Corp. Note Agreement, GECC GP Corp. agreed not to declare any dividends until the GP Corp. Note is satisfied.  In the Senior Note and Subordinated Note, 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 Corbel Facility and DME Revolver.

Concentration of Risk

The Company’s net investment revenue and receivables from continuing operations are attributable to the management of one investment vehicle, GECC.  GECC is a related party based on the Company owning approximately 19.5% of its outstanding common stock as of June 30, 2019.  See Note 5 – Related Party Transactions.

The Company’s real estate rental revenue from continuing operations is derived from one tenant.

The Company’s durable medical equipment revenue and related accounts receivable are concentrated with third-party Payors.  For the year ended June 30, 2019, two government program payor constituted approximately 28% and 11%, respectively, of consolidated revenues.  As of June 30, 2019, receivables from those government program payors constituted 20% and 16%, respectively, of our ending accounts receivable.  An additional third-party payor constituted another 12% of accounts receivables as of June 30, 2019.

A portion of the Company’s outstanding debt, the GP Corp. Note, is held by MAST Capital Management LLC (MAST Capital).  Funds affiliated with MAST Capital reported ownership of approximately 7.9% of the outstanding shares of the Company as of June 30, 2019.

F-14

Recently Adopted Accounting Standards

Revenue RecognitionIn May 2014, the Financial Accounting Standards Board (FASB) issued the New Revenue Standard, which replaced Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605), including industry-specific requirements, and provided companies with a single principles-based revenue recognition model for recognizing revenue from contracts with customers.  The core principle of the New Revenue Standard is that a company should recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

On July 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), (Topic 606) and related amendments, under the modified retrospective transition method.  Accordingly, the periods prior to adoption are presented under our prior accounting policies and we applied the new guidance to all open contracts with customers as of the implementation date.

The new guidance outlines a single revenue recognition model for all contracts with customers and provides a framework for addressing revenue recognition issues on a comprehensive basis.  The framework includes five steps:

1. Identifying the contract(s) with a customer.

2. Identifying the performance obligations in the contract.

3. Determining the transaction price.

4. Allocate the transaction price to the performance obligations in the contract.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The adoption of Topic 606 impacted the Company’s revenue recognition policy for incentive fee revenue associated with our investment management agreements.  The Company’s revenue recognition policy for rental revenue for its real estate segment did not change since the revenue recognition for such arrangements is outside the scope of Topic 606.

Under Topic 606, variable consideration such as incentive fees must be constrained (not recognized) if it is not probable that there would not be a significant reversal of recognized revenue.  There was no impact on the Company’s revenue recognition policy for management and administrative revenues as these amounts are not subject to constraint.  The Company fully constrained its performance-based incentive fee revenue in contrast to recognizing revenue based on a hypothetical liquidation of net assets on the reporting date and the distribution of the net proceeds in accordance with the respective investment management agreements under its prior policies.  Under the modified retrospective method, the cumulative effect of adopting Topic 606 was recognized as an adjustment to eliminate incentive fees receivable and increase accumulated deficit of $2.9 million and after such adjustment there were no incentive fees receivable.

The following table reflects the impact of the cumulative effect of the accounting changes upon the adoption of Topic 606 on the consolidated balance sheet as of the beginning of the period:

(in thousands)	As of June 30, 2018			Impact of accounting change			As of July 1, 2018
Incentive fees receivable - related party	$	2,919		$	(2,919	)	$	-
Accumulated deficit		(3,238,547	)		(2,919	)		(3,241,466	)

F-15

The following table shows the effect of the change in accounting on the consolidated statement of operations:

	For the year ended June 30, 2019
(in thousands)	Under Topic 605			Under Topic 606			Effect of Change
Investment management revenues	$	6,975		$	3,841		$	3,134
Durable medical equipment sales and services revenue		27,298			27,298			-
Total revenues accounted for under Topic 606	$	34,273		$	31,139		$	3,134
Total revenues		54,314			51,180			3,134
Net income (loss) from continuing operations		(3,734	)		(6,868	)		3,134
Net income (loss)		2			(3,132	)		3,134
Net income (loss) attributable to Great Elm Capital Group		226			(2,908	)		3,134
Basic and diluted net income (loss) per share	$	0.01		$	(0.11	)	$	0.12

Fair Value Measurements In August 2018, the FASB issued 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.  ASU 2018-13 is effective for interim and annual periods beginning after December 15, 2019, with an option to early adopt any eliminated or modified disclosures, and to delay adoption of the additional disclosures, until the effective date.  The Company early adopted the eliminated and modified disclosures of ASU 2018-13 during the three months ended September 30, 2018 and, as a result, updated its financial statement disclosures accordingly. A modified narrative description of measurement uncertainty for level 3 fair value measurements was applied prospectively, with all other amendments applied retrospectively.

Lessor Lease Accounting In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors (ASU 2018-20).  The new guidance permits lessors, as an accounting policy election, to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs, and instead, account for those costs as lessee costs.  Additionally, the guidance updates revenue recognition related to variable payments by (1) requiring lessors to exclude from variable payments lessor costs paid directly to third parties by lessees; and (2) requiring lessors to allocate certain variable payments to lease and nonlease components when there are changes in facts and circumstances on which the variable payment is based.  When an allocation of variable payments between lease and nonlease components is made, the variable payment allocated to the lease component will be recognized as revenue in accordance with Topic 842, whereas the variable payment allocated to the nonlease component will be recognized in accordance with other applicable topics, such as Topic 606.  On January 1, 2019, the Company adopted ASU 2018-20 on a prospective basis and did not make the accounting policy election to account for certain taxes as lessee costs.  Sales and use taxes incurred and reimbursed by lessees related to our Real Estate business are recorded gross within real estate rental income and real estate expenses.  In addition, the adoption resulted in a reduction of real estate rental income and real estate expenses related to lessor costs paid directly to third parties by lessees of approximately $0.3 million during the year ended June 30, 2019.

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, 2019, 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.

F-16

3. Revenue

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

	For the years ended June 30,
(in thousands)	2019		2018		2017
Product and Services Revenue(1)
Investment Management
Management Fees	$	2,956	$	2,604	$	1,530
Incentive Fees		-		163		2,757
Administration Fees		885		1,318		640
		3,841		4,085		4,927
Durable Medical Equipment
Equipment Sales		22,400		-		-
Service Revenues		4,898		-		-
		27,298		-		-
Total product and services revenue	$	31,139	$	4,085	$	4,927
Rental Revenues
Real Estate
Rental Income		5,459		1,850		-
Durable Medical Equipment
Medical Equipment Rental Income		14,582		-		-
Total rental revenue		20,041		1,850		-
Total	$	51,180	$	5,935	$	4,927

(1) Revenue for sales of products or services recognized in the year ended June 30, 2019 was accounted for under Topic 606 and revenue for sales of products or services recognized in the years ended June 30, 2018 and 2017 was accounted for under Topic 605, as discussed in this note and Note 2 – Summary of Significant Accounting Policies.

Revenue Accounting Under Topic 605

Our revenue recognition policy as it relates to investment management revenue transactions was accounted for under Topic 605 prior to July 1, 2018.  The revenue recognition policies under Topic 605 were consistent with the accounting policies under Topic 606 discussed below for management fees and administration fees.  The accounting for incentive fee revenue under Topic 605 is discussed in Note 2 – Summary of Significant Accounting Policies under Recently Adopted Accounting Standards – Revenue Recognition.  As noted therein, for the years ended June 30, 2018 and 2017, the Company applied the hypothetical liquidation of net assets method to calculate performance fees due as of the reporting date.  Under the application of Topic 606, such incentive fees have not been recognizable to date.

Revenue Accounting Under Topic 606

In determining the appropriate amount of revenue to be recognized under 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.

F-17

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.

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.  There were no material changes in estimates recorded in the year ended June 30, 2019, relating to prior periods.

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

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 does not have any partially or unfilled performance obligations related to contracts with customers.  As such, the Company has no contract liabilities as of June 30, 2019.

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, 2019, net unbilled sales and service revenue is approximately $0.5 million and is included in accounts receivable.

We had no balances of contract assets or contract liabilities related to equipment sales and services as of June 30, 2018 as these contracts with customers were acquired in September 2018, with our acquisition of the durable medical equipment businesses.

F-18

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; as follows:

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.

Incentive Fees

The Company earns incentive fees based on the investment management agreements GECM has with GECC 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.  Incentive fees are recognized 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% to 20.0% 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.

Administration Fees

The Company earns administration fees based on the administration agreement GECM has with GECC whereby GECC reimburses GECM for costs incurred in performing administrative functions for GECC.  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 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.  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-19

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, 2019, 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 $0.9 million as of June 30, 2019.

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, 2019, net unbilled rental revenue is approximately $0.2 million and is included in accounts receivable.

We had no balances related to deferred revenue or unbilled revenue related to equipment rentals as of June 30, 2018 as these balances were acquired in September 2018, with our acquisition of the durable medical equipment businesses.

Real Estate Revenue

Rental Revenue

Consistent with the leases of durable medical equipment, the Company recognizes rental revenue on a straight-line basis over the non-cancelable term of the lease.  Under the terms of the lease, the Company may recover from the tenant certain expenses, including: insurance and other operating expenses.  For all expenses that are paid by the Company and reimbursed by the tenant, the recovery of these expenses is recognized in rental income in the accompanying consolidated statements of operations, in the same periods as the expenses are incurred.  These expenses recognized in both revenue and expense may fluctuate from period to period based on actual expense amounts.

4. Acquisitions

Durable Medical Equipment Acquisitions

In September 2018, through its subsidiary, DME Holdings, the Company acquired an 80.1% interest in DME Inc., an entity formed to acquire and combine two previously unrelated durable medical equipment distribution companies, Valley and Northwest, which both specialize in the distribution of sleep and respiratory care equipment, including positive air pressure equipment and supplies, ventilators, and oxygen equipment.  The medical distribution companies operate in Alaska, Arizona, Nebraska, Oregon and Washington.  The Company expects to achieve significant synergies and costs reductions through the combination of these companies in this acquisition.  Operating results of the acquired businesses have been included in the consolidated statements of operations since September 1, 2018 as the impact of including the period prior to September 7, 2018 was immaterial to the consolidated financial statements.

On the date of acquisition, the Company allocated the consideration given to the individual assets acquired and the liabilities assumed based on a preliminary estimate of their fair values.  The assessment of fair value initially reported, as of and for the three months ended September 30, 2018, was preliminary as the Company had not finalized its fair value estimates.

F-20

During the nine months ended June 30, 2019, the Company obtained and considered additional information related to the assets acquired and liabilities assumed, and recorded measurement period adjustments to the allocation of the purchase price noted below.The Company is still performing final evaluation of the acquired assets and liabilities assumed as of the acquisition date and all amounts are preliminary.  The Company is also in the process of obtaining finalized third-party tax returns and related support for purposes of finalizing the valuation of acquired tax attributes, which impacts the deferred tax balances at acquisition and the Company’s pre-existing valuation allowance at the acquisition date.  As such, the valuation of acquired tax attributes is preliminary and is subject to change as this provisional amount is finalized.

The acquisition date fair value of the consideration transferred is summarized in the following table:

(in thousands)	As Previously Reported(1)		Adjustment			As Adjusted
Cash	$	25,321	$	-		$	25,321
Net working capital adjustment		-		(254	)		(254	)
Increase in note payable to seller(2)		16,500		-			16,500
Debt assumed		9,275		-			9,275
Preferred stock in DME Holdings		5,266		-			5,266
Contingent consideration		1,225		(264	)		961
Total Consideration	$	57,587	$	(518	)	$	57,069

(1) As reported in our Form 10-Q for the three months ended September 30, 2018.

(2) Included in related party note payable on the consolidated balance sheet.

As a result of the adjustment to net working capital adjustment, $0.2 million in shares of preferred stock in DME Holdings were cancelled and forfeited and the remaining difference between the adjustment and the value of the preferred stock cancelled and forfeited was paid by the sellers to DME Holdings.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

(in thousands)	As Previously Reported(1)			Adjustment			As Adjusted
Accounts receivable	$	5,363		$	658		$	6,021
Inventories		1,546			(141	)		1,405
Other assets		503			-			503
Fixed assets		852			-			852
Equipment held for rent		8,470			(523	)		7,947
Goodwill		46,222			(1,481	)		44,741
Tradename		6,900			1,900			8,800
Non-compete agreements		1,450			(190	)		1,260
Right of use asset		4,205			-			4,205
Current liabilities		(6,374	)		419			(5,955	)
Operating lease liabilities		(4,285	)		-			(4,285	)
Deferred tax liabilities		-			(1,160	)		(1,160	)
Non-controlling interest		(7,265	)		-			(7,265	)
Net Assets Acquired	$	57,587		$	(518	)	$	57,069

(1) As reported in our Form 10-Q for the three months ended September 30, 2018.

The outstanding balances of the note payable to seller, debt assumed on the revolving credit facility, and the preferred stock in DME Holdings approximated fair value based upon current rates and terms available for similar instruments.

F-21

The trade name was determined to have a fair value of $8.8 million.  The valuation of the trade name was based on a relief from royalty method.  The key assumptions in applying the relief from royalty approach are as follows: royalty rate of 3.0% and a discount rate of 14%.

The non-compete agreements were determined to have a fair value of $1.3 million.  The valuation of the non-compete agreements was based on a lost profits method.  The key assumptions in applying the lost profits method are as follows; probability adjusted EBITDA of the acquired businesses and a discount rate of 14%.

Of the $10.1 million of acquired identifiable intangible assets, $8.8 million was assigned to tradenames and $1.3 million was assigned to non-compete assets, which are associated with the former sellers of the businesses.  All tradenames acquired have an expected life of 10 years over which they will be amortized on a straight-line basis, which matches the pattern of economic use of these assets.  The non-compete agreements have a weighted-average expected life of 4.2 years.  All non-compete agreements will be amortized on a straight-line basis, which approximates the pattern of economic use.  Neither tradenames nor the non-compete agreements have renewal terms or are expected to have any net realizable value at the end of their useful lives.

The contingent consideration arrangement requires the Company to pay up to $2.4 million of additional consideration to the acquired companies’ former shareholders if certain earnings before interest, taxes, depreciation and amortization (EBITDA) thresholds, as adjusted per the terms of the purchase agreement, are achieved for the 12 months ended December 31, 2018 and 2019.  Under the Transaction Agreement, payment of the contingent consideration for any period is subject to satisfaction of the applicable EBITDA, as adjusted threshold.  The fair value of the contingent consideration arrangement at the acquisition date was $1.0 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 as follows: 33.5% volatility and weighted-average cost of capital of 14%, and related EBITDA forecasts of the acquired businesses.  The contingent consideration is included within the current portion of related party payables in the consolidated balance sheets.

These fair value measurements are based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC Topic 820, Fair Value Measurement.  

Upon a subsequent sale of DME Inc., certain members of the DME Inc. management team will be entitled to a contingent bonus based on a percentage of the proceeds of the sale less the Company’s invested capital in DME Inc.

The $44.7 million of goodwill was assigned to the durable medical equipment segment and is attributable primarily to expected synergies and the assembled workforce of the acquired businesses.  Approximately $29.4 million of the goodwill is expected to be deductible for income tax purposes.  This amount is preliminary and subject to change as the provisional estimate is finalized.

The fair value of the 19.9% non-controlling interest in acquired companies is provisionally estimated to be $7.3 million. The fair value of the non-controlling interest was estimated based on the purchase price paid by the Company for its 80.1% of the acquired business since the non-controlling interest holders hold equity in DME Inc., which allows the holders to share in at least the same benefits inured from the acquisition as the Company.

The provisional amount of $1.2 million related to deferred tax liabilities relates primarily to identifiable intangible assets fair valued in purchase accounting that have no tax basis, as well as temporary differences of other acquired assets and liabilities.  The Company is in the process of obtaining the finalized third-party tax returns covering the pre-acquisition period in order to verify the income tax basis amounts related to assets acquired and liabilities assumed.  As a result, the related deferred tax balance sheet amounts and any potentially impacted income tax provision or benefit remain subject to adjustment once the final information becomes available and is evaluated by the Company.  The Company expects these provisional amounts to be resolved during the first quarter of fiscal 2020.  The reduction of the valuation allowance of the Company of $0.9 million directly attributable to the transaction was recognized as a benefit to the income tax provision in the year ended June 30, 2018.

F-22

The Company recognized $2.1 million of acquisition costs that were expensed in the year ended June 30, 2019.  These costs are included in general and administrative expenses in the accompanying consolidated statement of operations.  The Company also incurred $0.5 million in costs associated with issuing debt to finance the cost of the acquired businesses, which are debt issuance costs that are amortized over the term of the debt using the effective interest rate method.

Supplemental Pro Forma Information (unaudited)

The pro forma results presented below were prepared pursuant to the requirements of ASC Topic 805, Business Combinations, and give effect to the acquisition as if it had been consummated on July 1, 2017.  The pro forma results have been prepared for comparative purposes only and do not necessarily represent what revenue or results of operations would have been had the acquisition been completed on July 1, 2017.  In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved by the Company.

	For the years ended June 30,
(in thousands)	2019			2018
Revenues	$	59,529		$	53,107
Net loss		(2,946	)		(11,591	)
Net loss attributable to Great Elm Capital Group		(2,397	)		(11,497	)

These pro forma results presented include adjustments to historical operating results include the following activity related to the acquisition: (a) interest expenses incurred on the debt paid down and borrowed upon closing; (b) dividends on preferred stock in subsidiary; (c) amortization of intangible assets acquired; and (d) reclassification of non-recurring transaction costs to the prior period.

Acquisition of Midwest Respiratory Care, Inc. Assets and Liabilities

In June 2019, through its majority-owned subsidiary, DME Inc., the Company acquired certain assets and liabilities of Midwest related to its durable medical equipment business which specializes in the distribution of sleep and respiratory care equipment, including positive air pressure equipment and supplies, ventilators, and oxygen equipment.  The medical distribution business operates in Nebraska, Kansas and Iowa.  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 DME operations.  Operating results of the acquired businesses have been included in the consolidated statements of operations since June 12, 2019.

On the date of Acquisition, the Company allocated the consideration given to the individual assets acquired and the liabilities assumed based on a preliminary estimate of their fair values.  The Company is in the process of obtaining finalized third-party valuations of certain intangible assets and gathering information on all assets acquired and liabilities assumed, thus, all amounts re preliminary and are subject to change as these provisional estimates are finalized.

The acquisition date fair value of the cash consideration transferred was $6.3 million, of which $3.4 million was funded by additional debt under our existing Corbel Facility and $0.7 million was contributed by the non-controlling interests in DME Inc. on a pro rata basis with the Company.

F-23

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

(in thousands)	Amount
Inventories	$	7
Other assets		1
Fixed assets		52
Equipment held for rent		447
Goodwill		5,656
Non-compete agreements		180
Right of use asset		238
Operating lease liabilities		(238	)
Net Assets Acquired	$	6,343

The non-compete agreements are associated with the sellers of the business and were determined to have a fair value of $0.2 million.  The agreements have a weighted-average expected life of 5 years and will be amortized on a straight-line basis, which approximates the pattern of economic use.  The non-compete agreements have no renewal terms and are not expected to have any net realizable value at the end of their useful lives. The valuation of the non-compete agreements was based on a lost profits method.  The key assumptions in applying the lost profits method are as follows; probability adjusted EBITDA of the acquired business and a discount rate of 27%.

These fair value measurements are based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC Topic 820, Fair Value Measurement.  

The $5.7 million of 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.

Supplemental Pro Forma Information (unaudited)

The pro forma results presented below were prepared pursuant to the requirements of ASC Topic 805, Business Combinations, and give effect to the acquisition as if it had been consummated on July 1, 2017.  The pro forma results have been prepared for comparative purposes only and do not necessarily represent what revenue or results of operations would have been had the acquisition been completed on July 1, 2017.  In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved by the Company.

	For the years ended June 30,
(in thousands)	2019			2018
Revenues	$	54,520		$	9,275
Net loss		(2,165	)		(10,764	)
Net loss attributable to Great Elm Capital Group		(2,113	)		(10,493	)

These pro forma results presented include adjustments to historical operating results include the following activity related to the acquisition: (a) interest expense and debt financing costs incurred on the debt borrowed upon closing; (b) amortization of intangible assets acquired; and (c) reclassification of non-recurring transaction costs to the prior period.

The amounts of revenue and net loss of the combined acquired durable medical equipment businesses included in the Company’s consolidated statement of operations from the date of acquisition through June 30, 2019 is $41.9 million and $1.1 million.

F-24

Real Estate Acquisition

In March 2018, through its majority-owned subsidiary, Great Elm FM Holdings, Inc. (FM Holdings), the Company acquired an 80.1% interest in CRIC IT Fort Myers LLC (Property Owner) and a 19.9% interest was issued to the prior owner.  The Property Owner owns a fee simple interest in two Class A office buildings, Gartner I and Gartner II, situated on 17 acres of land in Fort Myers, FL (collectively, Property).  The Property Owner’s business activities are limited to the leases associated with the Property and under the terms of its borrowing arrangements the Property Owner has significant limitations on its business operations that essentially limit its activities to holding and leasing the Property.

To acquire its interest in the Property Owner, the Company paid a cash purchase price of approximately $2.7 million, incurred transaction costs of approximately $0.3 million, and issued a 19.9% non-controlling interest in the Property Owner valued at $0.7 million.  The transaction was an asset acquisition as substantially all of the value of the acquired assets related to the Property.  The Property Owner had two notes issued with a fair value of approximately $58 million at the acquisition date.  See Note 11 – Borrowings.

The following table summarizes the acquisition cost and the allocation to the assets acquired and liabilities assumed based on the relative fair values on the date of acquisition:

(in thousands)	Amount
Cash consideration	$	2,700
Cash and restricted cash acquired		(606	)
Transaction costs		261
Total consideration, net of cash and restricted cash acquired	$	2,355
Buildings	$	43,355
Land and site improvements		9,170
In-place lease intangible asset		6,028
Tenant improvements		3,500
Other assets		253
Senior note payable assumed		(52,227	)
Subordinated note payable assumed		(5,789	)
Deferred tax liability		(478	)
Other liabilities assumed		(786	)
Non-controlling interests		(671	)
Net assets acquired	$	2,355

The assigned values were based on the relative fair value of the net acquired assets.  The valuation of the Property considered both an income and cost approach to determine the fair value of the buildings, leasehold improvements, land, and site improvements.  The value of the in-place lease intangible was based on an income approach that considered the value of the lease to the Company.  These valuations included significant non observable inputs to the valuation model and therefore were level 3 fair value measurements in the fair value hierarchy.  The assumed debt obligations were valued using an income method considering market interest rates for similar instruments, which is a level 2 fair value measurement, at the acquisition date.

In connection with the acquisition, the acquired tax basis differed from the assigned book basis and the simultaneous equation method was used to assign the value of the asset and the related deferred tax liability.  The reduction of the valuation allowance of the Company of $0.3 million directly attributable to the transaction was recognized as a benefit to the income tax provision in the year ended June 30, 2018.

In the event of a refinancing or restructuring of the assumed debt obligations, the transfer of all or substantially all of the consolidated assets of FM Holdings and its subsidiaries, the transfer of a majority of the outstanding shares of FM Holdings to another party or merger of FM Holdings with another party, FM Holdings will incur a transaction fee to be

F-25

paid to the Property Manager in accordance with the transaction Contract of Purchase and Sale.  The transaction fee will be 7% of net cash proceeds less any amounts owed under the debt obligations, actual out-of-pocket fees and expenses in connection with the acquisition described above, any reasonable out-of-pocket fees and expenses incurred in the transaction giving rise to the transaction fee, and our invested capital.

5. Related Party Transactions

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.

Durable Medical Equipment

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 Capital Partners SBIC, L.P. (Corbel) (the Corbel Facility).  Jeffrey S. Serota, a member of the Company’s Board of Directors, serves as Vice Chairman to Corbel Capital Partners.  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, 2019 Corbel received preferred stock of DME Holdings and a non-controlling interest in DME Inc.  Pursuant to the Corbel Facility, Corbel was paid a structuring fee, will be paid an ongoing quarterly monitoring fee, and may be paid a deferred structuring fee if the loans are subject to early repayment.  See Note 11 - Borrowings for additional information on the Corbel Facility and Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

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.  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.  Additionally, the Company has a contingent liability to the sellers for $1.1 million, which is included in the current portion of related party payables on the balance sheet.  During the year ended June 30, 2019, the Company made payments of $0.3 million to the sellers as part of the contingent consideration.  See Note 8 – Fair Value Measurements for additional details.

As a result of measurement period adjustments to the net working capital discussed in Note 4 – Acquisitions, $0.2 million in shares of preferred stock in DME Holdings were cancelled and forfeited and the remaining difference between the adjustment and the value of the preferred stock cancelled and forfeited was paid by the sellers to DME Holdings.  During the year ended June 30, 2019, the Company redeemed $5.1 million in shares of preferred stock in DME Holdings from Corbel.

Investment Management

The Company’s wholly-owned subsidiary, GECM, has agreements to provide administrative services and manage the investment portfolio for GECC.  Under these agreements, GECM receives administrative fees, management fees based on GECC’s assets (other than cash and cash equivalents) and incentive fees if GECC has net capital gains or if its net investment income exceeds a specified hurdle rate.  Fees under the agreements began to accrue on November 4, 2016.  See Note 3 – Revenue for additional discussions of the fee arrangements.

All of the Company’s investment management revenue recognized for the periods presented was generated from the management and administration of GECC.  Additionally, the Company receives dividends from its investment in GECC and earns unrealized profits and losses based on the mark-to-market performance of GECC.  See Note 8 – Fair Value Measurements.

The following tables summarize activity and outstanding balances between GECC and the Company.

F-26

	For the years ended June 30,
(in thousands)	2019			2018			2017
Change in unrealized gain (loss) on investment in GECC    recorded in the period	$	(1,062	)	$	(2,714	)	$	(9,114	)
GECC dividends recorded in the period		2,431			2,352			1,306

	As of As of June 30,
(in thousands)	2019		2018
Dividends receivable from GECC	$	206	$	163
Investment management revenues receivable from GECC(1)		1,124		4,094

(1) Investment management fees receivable from GECC as of June 30, 2018 include incentive fee receivables of $2.9 million which have been reversed as a result of the adoption of Topic 606 on July 1, 2018.  See Note 2 – Summary of Significant Accounting Policies.

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

The Company owns approximately 19.5% 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.  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.

GECM has a profit sharing agreement with the Company’s majority-owned subsidiary GECC GP Corp. (Profit Sharing Agreement).  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 June 30, 2019; correspondingly, no profits were available to GECC GP Corp. under the profit sharing agreement.  Certain employees of the Company have a non-controlling interest in GECC GP Corp.  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

The Company’s wholly-owned subsidiary, Great Elm Opportunities GP, Inc. (GEOGP) serves as the general partner of Great Elm Opportunities Fund I, LP (GEOF).  As the general partner, GEOGP provides administrative services and manages the investment portfolio of GEOF.  Based on the performance of GEOF’s investment portfolio, GEOGP may be entitled to certain incentive allocations.  GEOF began investing in July 2018 and through June 30, 2019 no incentive allocations have been made to GEOGP.

As part of the entry into the investment management business in November 2016, the Company entered into a cost sharing agreement with MAST Capital Management, LLC (MAST Capital) and acquired certain assets from MAST Capital.  In consideration for the assets acquired, GECC GP Corp. issued a senior secured note payable (GP Corp. Note).  In addition, the Company issued warrants to purchase 54,733 shares of the Company’s common stock (MAST Warrants).  During the year ended June 30, 2018 the Company paid $0.4 million in non-reimbursable expenses in connection with the cost sharing agreement.  There was no such activity for the year ended June 30, 2019 as a result of the separation discussed below.

In September 2017, the Company entered into a separation agreement with MAST.  The separation agreement contemplated, among other things, a reduction in the principal balance of the GP Corp. Note, the termination of the cost sharing agreement and the exchange of the MAST warrants for new warrants to purchase 420,000 shares of the Company’s common stock (New MAST Warrants).  As a result of the separation, $0.5 million of non-vested stock-based compensation was forfeited.  In July 2018, MAST Capital exercised the New MAST Warrants.  MAST Capital is the beneficial owner of approximately 7.9% of the Company’s outstanding common stock as of June 30, 2019.  See Note 11 - Borrowings for additional discussion of the GP Corp. Note and Note 13 – Stockholders’ Equity for additional discussion of the warrant activity.

F-27

Prior to the September 2017 separation, certain MAST Capital employees were also employees of GECM.  In accordance with the terms of the cost sharing agreement, employee and other operating costs incurred with the Company’s investment management business are based on direct management of each company’s investment portfolio or correlated to percentages of assets under management.  For the year ended June 30, 2018, the Company incurred $0.4 million of non-reimbursable expenses under the cost sharing agreement prior to the separation, of which $0.3 million is included in investment management expenses and $0.1 million is included in selling, general and administrative expense on the statement of operations.  For the year ended June 30, 2017, $1.8 million of investment management expenses included in the statement of operations were charged to MAST Capital.

Real Estate

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. (GE FM Holdings).  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

6. Fixed Assets

The Company’s fixed assets consist of its leased real estate assets, 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, 2019			June 30, 2018
Real Estate Assets
Buildings	$	43,355		$	43,355
Land and site improvements		9,170			9,170
Tenant improvements		3,500			3,500
		56,025			56,025
Accumulated depreciation		(1,614	)		(384	)
Net carrying amount	$	54,411		$	55,641
Property and Equipment
Leasehold improvements	$	774		$	45
Vehicles		239			-
Computer equipment and software		187			-
Furniture and fixtures		331			27
Sleep study equipment		232			-
		1,763			72
Accumulated depreciation		(396	)		(31	)
Net carrying amount	$	1,367		$	41
Medical Equipment Held for Rental
Medical equipment held for rental	$	13,294		$	-
Accumulated depreciation		(4,154	)		-
Net carrying amount	$	9,140		$	-

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)	2019		2018		2017
Depreciation and amortization	$	1,619	$	1,124	$	340
Cost of durable medical equipment rentals		5,550		-		-
Total depreciation expense	$	7,169	$	1,124	$	340

F-28

7. Lessor Operating Leases

Medical Equipment Leases

Through its majority-owned subsidiary DME Inc., and the subsidiaries of DME Inc., the Company owns medical equipment which is leased to customers.  The Company’s customers consist primarily of patients through their clinical providers including medical centers, clinics and hospices and the Company has lease arrangements with these patients.  In addition, the arrangements between the Company and its customers are impacted by arrangements between the Company and Payors.  The Payors may cover a portion or all of the rental payments under the agreements between the Company and its customers.  The patient is responsible for any residual co-payments.

The lease terms may be for a pre-determined time period, generally 10 months to 36 months; however, the customer may cancel the lease at any time and for any reason without penalty and therefore, the Company treats all leases as month-to-month leases.  Upon termination of the lease, the equipment, if not aged beyond its useful life, may be refurbished and subsequently sold or leased to another customer.  As the leases are month-to-month, there are no future lease receivables under the terms of the current leases.

Real Estate Leases

The Company’s majority-owned subsidiary CRIC IT Fort Myers LLC (Property Owner) owns a fee simple interest in two Class A office buildings, Gartner I and Gartner II (collectively, the Property).  The Property is fully leased, on a triple net basis, to Gartner, Inc. (Gartner) until March 31, 2030, which may be extended at the option of Gartner in accordance with the terms of the lease.  The Gartner I lease contains two five-year extensions and the Gartner II lease contains three five-year extensions (collectively, the Leases).  Under the terms of the Leases, the renewal rates are equal to 95% of the then fair market rent, and the tenant does not have a purchase option at the end of the lease term.  The leases require Gartner to make a base monthly lease payment of approximately $0.4 million as calculated on a straight line basis over the remaining expected lease term plus additional rent payments for additional costs.  Additional rental payments are due for Property Owner costs, such as property taxes, management fees, and insurance costs, as incurred.  See Note 3 – Revenue for additional discussion of rental revenues.

The Property is subject to mortgage, security agreement and assignment of leases and rents with the senior and subordinated lenders, which is further described in Note 11 - Borrowings.  The Property Owner has assigned all rights, title and interest in and to the Property and the Leases to the senior and subordinated lenders and all amounts received are paid to a trust which funds the operating costs associated with the Property.  The Company does not have rights to these rent payments while the borrowings remain outstanding.

The Company expects to derive value from the residual value at the end of the existing lease term by further leasing the assets or through a sale transaction.

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

	For the years ended June 30,
(in thousands)	2019		2018
Revenues from base rents	$	4,603	$	1,473
Revenues from additional rental payments		856		377
Total rental revenues	$	5,459	$	1,850

F-29

The following table summarizes the base rents for the remaining lease term:

(in thousands)	Base Rent Payments
For the year ending June 30, 2020	$	4,120
For the year ending June 30, 2021		4,213
For the year ending June 30, 2022		4,312
For the year ending June 30, 2023		4,419
For the year ending June 30, 2024		4,529
Thereafter		28,673
Total base rent	$	50,266

8. Fair Value Measurements

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:

▪ Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

▪ Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

▪ Level 3: Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value.  These assumptions are required to be consistent with market participant assumptions that are reasonably available.

All financial assets or liabilities that are measured at fair value on a recurring and 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 basis are summarized in the table below:

	Fair Value as of June 30, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment in GECC	$	17,110	$	-	$	-	$	17,110
Total assets	$	17,110	$	-	$	-	$	17,110
Liabilities:
Contingent consideration liability	$	-	$	-	$	1,135	$	1,135
Total liabilities	$	-	$	-	$	1,135	$	1,135

The only recurring fair value measurements at June 30, 2018 was the investment in GECC which did not have any restrictions at that date.  The investment in GECC was valued using Level 1 inputs at June 30, 2018.

F-30

The following is a reconciliation of changes in contingent consideration, a Level 3 liability, for the year ended June 30, 2019:

(in thousands)
Balance as of June 30, 2018	$	-
Additions		961
Payments		(295	)
Change in fair value		469
Balance as of June 30, 2019	$	1,135

There were no Level 3 assets or liabilities held during the year ended June 30, 2018.

Contingent consideration is included within the current portion of related party payables in the consolidated balance sheets.  The contingent consideration arrangement required the Company to pay up to $2.4 million of additional consideration to the acquired companies’ former shareholders if certain EBITDA thresholds, as adjusted per the terms of the purchase agreement, are achieved for the 12 months ended December 31, 2018 and 2019.  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 September 7, 2018 are as follows: 33.5% volatility and weighted average cost of capital of 14% and related EBITDA forecasts of the acquired businesses for the years ended December 31, 2018 and 2019.  A fair value of $1.0 million was calculated as of the acquisition date.

In June 2019, in conjunction with the Midwest acquisition, there was an amendment to the Transaction Agreement which adjusted certain terms of the related EBITDA target calculation for the 12 months ended December 31, 2019, making it easier to achieve.  As part of this amendment, a payment of $0.3 million was made to certain former shareholders.  The fair value of the remaining contingent consideration was updated to $1.1 million as of June 30, 2019, resulting in a $0.4 million charge which is included in sales, general and administrative expenses.  The valuation as of June 30, 2019 utilized a 27.4% volatility rate and weighted average cost of capital of 12% and estimate of forecasted adjusted EBITDA of the business.

The ultimate payout of the contingent consideration will be based on actual results achieved. As the fair value of the contingent consideration changes until finalized with the results for the twelve months ended December 31, 2019, these changes may have a material impact on earnings.  The Company determined that the EBITDA achieved, as adjusted per terms of the contract, for the 12 months ended December 31, 2018 was below the earnout threshold for payout, however, $0.3 million was paid to the sellers in June 2019 related to the year ended December 31, 2019.  An additional contingent consideration payment of up to $2.1 million may be due to the sellers following completion of the review process or if the applicable targets are met during the year ended December 31, 2019.

The Company owns approximately 19.5% (or 1,966,667 shares) of the outstanding shares of GECC and values its ownership based on the NASDAQ-listed market price of GECC common stock (a Level 1 input in accordance with the US GAAP fair value hierarchy).

The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred.  There were no transfers between levels of the fair value hierarchy during the years ended June 30, 2019 and 2018.

F-31

See Note 11 - 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.

9. Goodwill and Other Intangible Assets

The Company’s investment management and real estate segments include identifiable intangible assets acquired through acquisitions in 2016 and 2018, respectively.  In connection with the acquisition of the durable medical equipment businesses and the subsequent acquisition of Midwest, the Company has also recognized goodwill and identifiable intangible assets associated with the tradenames and non-compete agreements.  See Note 4 – Acquisitions.  Intangible assets are amortized using applicable discounted cash flow attribution and straight-line methods over their useful lives.

Goodwill of $50.4 million presented on the 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.  See Note 4 – Acquisitions for additional details.  There was no goodwill as of June 30, 2018.

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

(in thousands)
Balance, June 30, 2018	$	-
Acquisitions		50,397
Balance, June 30, 2019		50,397

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

	As of June 30, 2019							As of June 30, 2018
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Durable Medical Equipment
Tradename	$	8,800	$	(733	)	$	8,067	$	-	$	-		$	-
Non-compete agreements		1,440		(210	)		1,230		-		-			-
		10,240		(943	)		9,297		-		-			-
Investment Management
Investment management agreement		3,900		(1,336	)		2,564		3,900		(789	)		3,111
Assembled workforce		526		(180	)		346		526		(106	)		420
		4,426		(1,516	)		2,910		4,426		(895	)		3,531
Real Estate
In-place lease		6,028		(659	)		5,369		6,028		(159	)		5,869
Total	$	20,694	$	(3,118	)	$	17,576	$	10,454	$	(1,054	)	$	9,400

Aggregate Amortization Expense (in thousands):
For the year ended June 30, 2019	$	2,063
For the year ended June 30, 2018		730
For the year ended June 30, 2017		324

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Estimated Future Amortization Expense (in thousands):
For the year ending June 30, 2020	$	2,335
For the year ending June 30, 2021		2,187
For the year ending June 30, 2022		2,028
For the year ending June 30, 2023		1,887
For the year ending June 30, 2024		1,701

10. Lessee Operating Leases

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, 2019			June 30, 2018
Facilities
Right of use assets	$	6,066		$	1,521
Current portion of lease liabilities		1,371			336
Lease liabilities, net of current portion		4,989			1,304
Total liabilities	$	6,360		$	1,640
Weighted-average remaining life	4.4 years			6.3 years
Weighted-average discount rate		11.7	%		10.0	%
Vehicles
Right of use assets	$	80		$	-
Current portion of lease liabilities		18			-
Lease liabilities, net of current portion		62			-
Total liabilities	$	80		$	-
Weighted-average remaining life	3.7 years			n/a
Weighted-average discount rate		12.3	%	n/a
Equipment
Right of use assets	$	93		$	-
Current portion of lease liabilities		34			-
Lease liabilities, net of current portion		59			-
Total liabilities	$	93		$	-
Weighted-average remaining life	2.6 years			n/a
Weighted-average discount rate		12.5	%	n/a

As of June 30, 2019, the Company had total right of use assets of $6.2 million and lease liabilities of $6.5 million (consisting of $1.4 million in current portion of lease liabilities and $5.1 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.

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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)	2019		2018		2017
Facilities
Operating lease cost	$	1,777	$	353	$	723
Cash paid for operating leases		1,720		920		786
Vehicles
Operating lease cost	$	23	$	-	$	-
Cash paid for operating leases		23		-		-
Equipment
Operating lease cost	$	31	$	-	$	-
Cash paid for operating leases		31		-		-

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

(in thousands)
For the year ending June 30, 2020	$	2,090
For the year ending June 30, 2021		2,027
For the year ending June 30, 2022		1,772
For the year ending June 30, 2023		1,135
For the year ending June 30, 2024		781
Thereafter		549
Total lease payments	$	8,354
Imputed interest		(1,821	)
Total lease liabilities	$	6,533

Durable Medical Equipment

As part of the durable medical equipment acquisitions discussed in Note 4 – Acquisitions, the Company assumed leases for facilities, vehicles and equipment.  Subsequent to the acquisitions, the Company has entered into additional similar facilities leases.

The facility leases include offices, retail and warehouse space and sleep labs.  The facility leases have original or amended terms ranging from 60 to 183 months, some of which include an additional option to extend the lease for up to 180 months.  At the date of acquisition, the remaining lease terms for acquired leases ranged from 3 to 96 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.

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Investment Management and General Corporate

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% from $28 to $32 thousand per month.

11. Borrowings

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

		As of June 30,
(in thousands)	Subsidiaries	2019			2018
Corbel Facility	DME Inc. and subsidiaries	$	27,584		$	-
GP Corp. Note	GECC GP Corp.		3,148			3,224
Total principal		$	30,732		$	3,224
Unamortized debt issuance cost			(364	)		-
Total long-term related party notes payable			30,368			3,224
Less current portion of related party notes payable			(2,066	)		-
Related party notes payable, net of current portion		$	28,302		$	3,224

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

		As of June 30,
(in thousands)	Subsidiaries	2019			2018
DME Revolver	DME Inc. and subsidiaries	$	7,401		$	-
Equipment Financing	DME Inc. and subsidiaries		1,475			-
Senior Note	CRIC IT		52,161			54,161
Subordinated Note	CRIC IT		3,277			2,823
Total principal		$	64,314		$	56,984
Unamortized debt premiums			3,205			3,131
Unamortized debt discounts and issuance costs			(2,250	)		(2,484	)
Total other outstanding borrowings			65,269			57,631
Less current portion of other outstanding borrowings			(3,530	)		(1,999	)
Other outstanding borrowings, net of current portion		$	61,739		$	55,632

The Company incurred interest expense of $6.3 million, $1.1 million and $6.3 million for the years ended June 30, 2019, 2018 and 2017, respectively.

F-35

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

(in thousands)	Principal Due
For the year ending June 30, 2020	$	5,596
For the year ending June 30, 2021		11,276
For the year ending June 30, 2022		4,048
For the year ending June 30, 2023		4,195
For the year ending June 30, 2024		24,246
Thereafter		58,677
Total	$	108,038
Outstanding principal on related party borrowings	$	30,732
Outstanding principal on other borrowings		64,314
Future interest to be paid-in-kind		12,992
Total future required principal payments	$	108,038

Additional details of each borrowing by operating segment are discussed below.

Durable Medical Equipment

In September 2018, in conjunction with the acquisition of 80.1% of Great Elm 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 acquisition described in Note 4 – Acquisitions.  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.

The Company amended and borrowed an additional $3.4 million under the Corbel Facility in June 2019 bringing the outstanding principal balance to $27.6 million as of June 30, 2019.  The Corbel Facility matures on August 31, 2023, accrues interest at a variable rate of three-month LIBOR plus 10% per annum and is secured by the assets of the durable medical equipment business.  At June 30, 2019 the interest rate was 12.32%.  The Corbel Facility requires quarterly interest payments and principal payments of $0.3 million through the maturity date with the final principal balance due at maturity.  In addition, beginning with the quarter ending December 31, 2018, the Company is required to make additional quarterly principal payments based on a percentage of excess cash flows generated by the durable medical equipment business operations.  The Company has the option to prepay the borrowings outstanding in whole or in part subject to certain prepayment penalties ranging from 1% - 5% of the early payment of the principal, based on the time that the loan has been outstanding through the first five years of the loan.

The Corbel Facility is held by a related party, Corbel.  In connection with the issuance of the amended Corbel Facility, the borrowers paid Corbel a one-time structuring fee of $375,000, which is included in debt issuance costs.  See Note 5 – Related Party Transactions and Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

DME Inc. is required to pay to Corbel, as agent of the Corbel Facility, a quarterly monitoring fee of $25,000 while the borrowings remain outstanding.  In addition, if the borrowing is repaid with proceeds of debt in full or in part at any time within the first three years from the date of issuance, the borrower shall pay an additional fee to the agent, ranging from 2.10% to 3.50% depending on the date of repayment based on the period outstanding, of the aggregate repaid principal amount.

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

	For the years ended June 30,
(in thousands)	2019		2018		2017
Principal payments	$	625	$	-	$	-
Interest expense		2,617		-		-

F-36

The DME Revolver had a balance of $7.4 million at June 30, 2019 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 August 30, 2020 and accrue interest at a variable rate of the prime rate plus 0.40% per annum.  At June 30, 2019 the interest rate was 5.90%.  Interest is payable monthly in arrears.  The Company has the option to prepay the borrowings without any penalty.  If the DME Revolver is terminated within the first year, a termination fee equal to 3% of the original credit limit will be due.  The Company has classified all borrowings under the DME Revolver as long term in the consolidated balance sheets 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 the Company is required to meet certain financial covenants.

The Corbel Facility and DME Revolver each include 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.  Events of default include the failure to pay amounts when due, bankruptcy, or violation of covenants, including a change in control of DME Inc.  DME Inc. must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the DME Inc. EBITDA levels.

As of June 30, 2019, the fair value approximates the carrying value for both the Corbel Facility and the DME Revolver.

Beginning in April 2019, DME Inc’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%.  During the year ended June 30, 2019, the Company financed $1.6 million in inventory and equipment through such financing agreements.

Investment Management

The GP Corp. 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 June 30, 2019 the interest rate was 5.32%.  The GP Corp. Note requires quarterly interest only payments and annual principal payments of $0.08 million, based on the Company’s fiscal year ending June 30.

The GP Corp. Note is non-recourse to any of the Company’s operations or net assets not related to GECM’s management services to GECC.  The GP Corp. Note may be prepaid at par value at any time with prior written notice to the holders of the GP Corp. Note.  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.

The GP Corp. Note is held by MAST Capital, a related party.  Payments and interest expense incurred on the GP Corp. Note are summarized in the following table:

	For the years ended June 30,
(in thousands)	2019		2018		2017
Principal payments	$	76	$	712	$	36,838
Interest expense		181		217		285

The Company estimated the fair value of the GP Corp. Note as of June 30, 2019 and June 30, 2018, on a non-recurring basis, using Level 3 inputs.  As of June 30, 2019 and June 30, 2018, the carrying value of the note approximated the fair value.

F-37

Real Estate

In March 2018, in connection with the acquisition of the real estate business, the Company assumed a senior secured note (Senior Note) with a principal balance of $54.8 million and a subordinated note (Subordinated Note) with a principal balance of $2.7 million at the date of acquisition.  The Senior Note was recorded at an estimated fair value of $52.2 million, reflecting a discount of $2.6 million from the face amount; and the Subordinated Note was recorded at $5.8 million, reflecting a premium of $3.1 million.  The discount and premium amortize over the life of the notes.

The Senior Note matures on March 15, 2030, accrues interest at a rate of 3.49% per annum and is secured by a first lien mortgage on the Property and an Assignment of Leases and Rents.  The Senior Note requires monthly principal and interest payments through the maturity date, with the last payment of $18.4 million on March 15, 2030.  The principal and interest due on the Senior Note may be prepaid at the option of the borrower, based on an amount determined by discounting the remaining principal and interest payments at a rate equal to an applicable premium in excess of a rate corresponding to the specified U.S. Treasury security over the remaining average life of the Senior Note.

The Subordinated Note matures on March 15, 2030, accrues interest at a rate of 15.0% per annum, and is secured by a second lien mortgage on the Property and an Assignment of Leases and Rents.  The Subordinated Note is a capital appreciation note, whereby the monthly interest is capitalized to the principal balance and due at maturity.  Accordingly, a $16.3 million payment is due on March 15, 2030.  The principal and interest due on the Subordinate Note may be prepaid at the option of the borrower, based on an amount determined by discounting the remaining principal and interest payments at a rate equal to an applicable premium in excess of a rate corresponding to the specified U.S. Treasury security over the remaining average life of the Subordinated Note.

The note agreements include negative covenants that restrict the Property Owner’s business operations to ownership and lease of the Property, limit additional indebtedness, require maintenance of insurance and other customary requirements related to the Property.  Events of default include non-payment of amounts when due, inability to pay indebtedness or material change in the business operations or financial condition of the Property Owner or the lease tenant that in the Lender’s reasonable determination would reasonably be expected to materially impair the value of the Property, prevent timely repayment of the notes or performance of any material obligations under the note and related agreements.  The payments under the notes are also guaranteed on a full and several basis by the non-controlling interest holder of the Property Owner.  Both the Senior Note and Subordinated Note are non-recourse to the Company, but are secured by the Property, the rights associated with the Leases and the stock owned by the Company in the Property Owner.  See Note 7 – Lessor Operating Leases.

As of June 30, 2019 and June 30, 2018, the fair value approximates the carrying value for both the Senior Note and Subordinated Note.

12. Stockholders' Equity

Rights Offering

In September 2016, the Company entered into a backstop investment agreement with a consortium of investors led by Gracie Investing LLC.  Members of the Company’s board of directors and a number of the Company’s employees were backstop investors.  In October 2016, the Company and the backstop providers amended and restated the backstop investment agreement which contemplated up to a $36.6 million investment in shares of the Company’s common stock.  In November 2016, the Company commenced a $45 million rights offering to its existing stockholders at a price of $3.285 per share.  The Company sold an aggregate of 12,755,200 shares of its common stock for gross proceeds of $41.9 million, which after deducting expenses, totaling approximately $2.4 million, resulted in net proceeds of $39.5 million in the rights offering; and 945,333 shares of its common stock for gross proceeds of $3.1 million from the backstop providers.

F-38

Tax Benefits Preservation Agreement

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% or more of the Company’s common stock and the ability of persons or entities now owning 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 one Preferred Stock Purchase Right (a Tax Right) for each outstanding share of common stock, par value $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, one 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 per share, of the Company at a cash exercise price of $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.

Stock Plans

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.  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.  As of June 30, 2019, the Company had a total of 2,000 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 one 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, 2019, the Company had a total of 214,685 shares outstanding under the 2006 Stock Plan.

F-39

In June 2016, the Company’s stockholders approved the Great Elm Capital Group, Inc.  2016 Long-Term Incentive Plan (the 2016 Long-Term Incentive Plan) and the Great Elm Capital 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.  As of June 30, 2019, the Company had a total of 3,221,668 shares outstanding under the 2016 Long-Term Incentive Plan and no shares were outstanding under the 2016 Employee Stock Purchase Plan.

The following table summarizes the number of common shares reserved for issuance under the plans discussed above as of June 30, 2019:

Shares of Common Stock Reserved for Issuance
Director's Plan	24,166
2006 Plan	-
2016 Long-Term Incentive Plan	1,042,043
2016 Employee Stock Purchase Plan	944,000
Total	2,010,209

Performance Shares (Restricted Stock Awards)

During the year ended June 30, 2019, there were no awards or forfeitures of restricted stock awards included in the below table and 732,909 remain outstanding as of June 30, 2019.  Restricted stock awards granted have both performance and service requirements in connection with the formation of the investment management business.  The vesting of these awards is subject to a five-year service requirement and an investment management cumulative revenue collection target of $40 million for the five-year period ended November 3, 2021. Additionally, in September 2017, the Company modified the restricted stock awards to include a provision for changes in control.  This modification did not result in the recognition of additional compensation cost.

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 June 30, 2019, the Company estimates that approximately 479,504 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 no forfeitures during the year ended June 30, 2019.

The aggregate grant date fair value of restricted stock granted during the 2019, 2018 and 2017 fiscal years was $0.6 million, $0.3 million and $4.5 million, respectively.  For the years ended June 30, 2019 and 2018, the total intrinsic value of restricted stock vested was $0.6 million and $1.2 million, respectively.  There was no restricted stock vested during the year ended June 30, 2017.

The activity of the Company’s restricted stock awards and units for the year ended June 30, 2019 was as follows:

Restricted Stock Awards and Restricted Stock Units	Restricted Stock (in thousands)			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2018		767		$	3.92
Granted		186			3.43
Vested		(171	)		3.53
Forfeited		-			-
Outstanding at June 30, 2019		782		$	3.89

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

F-40

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:

	As of June 30,
	2019		2018		2017
Expected volatility	58.9% - 59.8%		60.8% - 63.4%		64.7% - 66.6%
Expected dividends		-		-		-
Expected term (years)	6.25 - 6.50		3.00 - 6.50		6.25 - 7.25
Risk-free rate	2.27% - 3.13%		1.54% - 2.52%		1.50% - 2.00%

The option activity for the year ended June 30, 2019 was as follows:

Options	Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2018		2,676		$	4.31		7.44	$	70
Options granted		110			3.74
Exercised		(44	)		3.25
Forfeited, cancelled or expired		(86	)		3.62
Outstanding at June 30, 2019		2,656		$	4.33		6.49	$	1,590
Exercisable at June 30, 2019		1,717		$	4.72		5.45	$	945
Vested and expected to vest as of June 30, 2019		2,656		$	4.33		6.49	$	1,590

The weighted average grant date fair value of options, per share, granted during the 2019, 2018 and 2017fiscal years was $2.19, $1.95, and$3.68, respectively.  During the year ended June 30, 2019, the total intrinsic value of options exercised was approximately $0.1 million.  There were no options exercised during the year ended June 30, 2018.

Stock-based compensation expense totaled $1.0 million, $4.4 million, and $2.0 million for the years ended June 30, 2019, 2018 and 2017, respectively.  Stock-based compensation expense for the year ended June 30, 2018 included approximately $1.5 million related to modified and accelerated GP Corp. stock-based compensation charges as a result of the Company eliminating the vesting provisions and removing the call rights for the GP Corp. stock owned by employees of the Company.  The recognized stock-based compensation expense equaled the estimated fair value of the non-controlling interest held by our employees in GP Corp. at the time of the modification.

As of June 30, 2019 and 2018, the Company had unrecognized compensation cost related to all unvested share awards and options totaling $2.9 millionand $3.8 million, respectively, expected to be recognized as the awards and options vest over the next 1.6years.

GP Corp. Stock – Non-Controlling Interest

In September 2107, the Company eliminated the vesting provisions and removed the call rights for the GP Corp. stock owned by employees of the Company.  As a result of the elimination, the Company recognized stock-based compensation expense of $1.5 million for the year ended June 30, 2018, equal to the estimated fair value of the non-controlling interest held by our employees in GP Corp.

F-41

Other Equity Transactions

Warrants

During the year ended June 30, 2018, the Company issued warrants to purchase 1,686,000 shares of common stock with an estimated grant date fair value of $0.05 million.  The exercise price of the warrants was variable and based on the average of quoted market prices for the ten days preceding notice of exercise.  The Company utilized a Monte-Carlo simulation model to estimate the fair value of its equity-classified warrant issuances.

During the year ended June 30, 2019, the Company received cash proceeds totaling $1.4 million from the exercise of 420,000 warrants by MAST Capital at approximately $3.35 per share.  During the year ended June 30, 2018, the Company received cash proceeds totaling $4.6 million from the exercise of 1,266,000 warrants by a designee of Northern Right Capital Management, L.P at approximately $3.60 per share.  Matthew A. Drapkin, a member of the Company’s Board of Directors, is the Chief Executive Officer of Northern Right Capital Management, L.P.

There are no remaining warrants outstanding at June 30, 2019.

13. Non-Controlling Interests and Preferred Stock of Subsidiary

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 and preferred stock of subsidiary balances on the consolidated balance sheets:

	As of June 30,
(in thousands)	2019			2018
DME Holdings
Preferred stock classified as liability	$	-		$	-
DME Inc.
NCI classified as temporary equity		3,912			-
NCI classified as permanent equity		3,912			-
Total DME Inc.		7,824			-
GECC GP Corp.
NCI classified as permanent equity		(626	)		(465	)
GE FM Holdings
NCI classified as permanent equity		730			687
Total	$	7,928		$	222

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,
(in thousands)	2019			2018			2017
DME Holdings
Preferred stock classified as liability	$	-		$	-		$	-
DME Inc.
NCI classified as temporary equity		(53	)		-			-
NCI classified as permanent equity		(53	)		-			-
Total DME Inc.		(106	)		-			-
GECC GP Corp.
NCI classified as permanent equity		(160	)		(455	)		(30	)
GE FM Holdings
NCI classified as permanent equity		42			16			-
Total	$	(224	)	$	(439	)	$	(30	)

F-42

Preferred stock in DME Holdings classified as liability

In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued 5,266 shares of preferred stock in DME Holdings valued at $1,000 per share at issuance.  In January 2019, as a result of adjustments to the net working capital adjustment to the total consideration for the acquisition, 214 shares of preferred stock were cancelled and forfeited.  The Company redeemed an additional 1,500 shares of preferred stock in March 2019 and the remaining 3,552 shares of preferred stock were redeemed in June 2019.  As of June 30, 2019, there were no shares of preferred stock in DME Holdings outstanding.  The following table summarizes the preferred stock activity for the year ended June 30, 2019:

(in thousands)
Balance as of June 30, 2018	-
Issuance of preferred stock	5,266
Redemption of preferred stock	(5,266	)
Balance as of June 30, 2019	-

The preferred stock provided for a 10% annual dividend, which was payable semi-annually.  The preferred stock were mandatorily redeemable by the Company at their face value of $1,000 per share on the earlier of certain redemption events or September 7, 2038.  The redemption events included a change in control, initial public offering, liquidation of DME Holdings, or failure to pay dividends.  The preferred stock ranked senior and had preference to the common shares of DME Holdings.  The shares were non-voting, did not participate in the earnings of DME Holdings and contained standard protective rights.

As the preferred stock were mandatorily redeemable at a specified date, the security had been classified as a liability in the consolidated balance sheet for the interim periods during which the preferred stock were outstanding.  The dividends on the preferred stock are included in interest expense in the consolidated statement of operations.

Under the terms of the preferred stock, DME Holdings had to maintain a required level of capitalization.  At the option of the Company, such capitalization was required to be an amount in cash and/or common stock of GECC, net of any debt of DME Holdings, with an aggregate value greater than or equal to 125% of the value of the shares of preferred stock.  If at any month end the value of the qualifying assets fell below the required threshold, the Company contributed additional assets to meet the capitalization requirements.  Similarly, if at any month end the value of the qualifying assets exceeded the required threshold, the Company removed the excess assets.  This investment was classified as restricted investments in the consolidated balance sheet during the applicable interim periods.  Upon redeeming all the outstanding preferred stock in June 2019, the restriction on this investment was removed.

The preferred stock were held by Corbel, who is also the holder of the Corbel Facility and the non-controlling interest in DME Inc. classified as temporary equity discussed below.  See Note 5 – Related Party Transactions and Note 11 – Borrowings.

F-43

Non-controlling interest in DME Inc. classified as temporary equity

In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued a 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.

The holder of this non-controlling interest, Corbel, is a related party.  See Note 5 – Related Party Transactions and Note 11 – Borrowings.

Non-controlling interest in DME Inc. classified as permanent equity

In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued one of the former owners, a 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.

GECC GP Corp. – Non-controlling interest classified as permanent equity

In September 2017, the Company eliminated the vesting provisions and removed the call rights for the GECC GP Corp. stock owned by employees of the Company.  As a result of the elimination, the Company recognized stock-based compensation expense of $1.5 million, equal to the estimated fair value of the non-controlling interest held by our employees in GECC GP Corp.

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

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

14. Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was signed into law.  Among other changes resulting from the Tax Act is a reduction in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018.  The Company remeasured certain deferred tax assets and liabilities based on the rate in which they are anticipated to be reversed in the future, which is generally 21%.  The amount recorded related to the remeasurement of the Company’s deferred tax balance was a tax expense of approximately $239.4 million and an off-setting adjustment to the valuation allowance.  The Company provides a full valuation allowance for all of its federal and state deferred tax assets, therefore the reduction in the federal deferred tax assets resulting from the Tax Act had no effect on the Company’s consolidated balance sheet or statement of operations as of and for the year ended June 30, 2018.  During the year ended June 30, 2019, the Company finalized the impact of the Tax Act with no adjustments to the preliminary amount necessary.

F-44

The Company had loss from continuing operations before provision for income taxes of $9.1 million, $11.7 million and $18.7 million for the years ended June 30, 2019, 2018 and 2017, respectively.  There was no foreign activity during these years.

The provision (benefit) for income taxes includes the following:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Current:
Domestic Income Tax	$	84		$	-		$	-
Foreign Income Tax		-			-			-
	$	84		$	-		$	-
Deferred:
Domestic Income Tax	$	(2,266	)	$	(329	)	$	(1,210	)
Foreign Income Tax		-			-			-
	$	(2,266	)	$	(329	)	$	(1,210	)
Total	$	(2,182	)	$	(329	)	$	(1,210	)

The Company recognized an income tax benefit from continuing operations of $2.2 million, $0.3 million, and $1.2 million for the years ended June 30, 2019, 2018 and 2017, respectively.

During 2019, the Company recognized an income tax benefit with respect to discontinued operations of $1.3 million related to intraperiod allocations.  In addition, the Company recognized an income tax benefit with respect to deferred tax liabilities of $0.9 million acquired in the durable medical equipment acquisition.  During 2017, the Company recognized income tax with respect to discontinued operations of $1.2 million related to intraperiod allocations.  During 2017, income tax expense from discontinued operations totaled $0.9 million, net of the release of $0.3 million of accrued taxes for divested foreign subsidiaries and other for taxes previously accrued by the subsidiaries.  No intraperiod allocations were made in 2018.

The following table reconciles the expected corporate federal income tax expense (benefit), computed by multiplying the Company's income (loss) before income taxes by the statutory income tax rate of 21% for fiscal year 2019, 28.06% for fiscal year 2018 and 35% for fiscal year 2017:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Federal benefit at statutory rate	$	(1,900	)	$	(3,268	)	$	(6,523	)
State taxes		(427	)		(301	)		(794	)
Permanent adjustments		36			4			22
Change in valuation allowance		(5,788	)		(248,923	)		6,230
Provision to return true-up		(134	)		125			(87	)
Deferred remeasurement		(174	)		239,608			-
Net operating loss and credit expirations		6,335			11,805			-
Stock compensation adjustment		(122	)		607			-
Other		(8	)		14			(58	)
Total Tax Expense/(Benefit)	$	(2,182	)	$	(329	)	$	(1,210	)

F-45

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

	As of June 30,
(in thousands)	2019			2018
Deferred Tax Assets:
Net operating loss carryforwards	$	358,913		$	365,546
Accruals and allowances not deductible for tax purposes		2,399			1,945
Stock based compensation		799			684
Unrealized loss on investment		3,299			2,846
Lease liability		1,298			-
Interest expense carryforward		900			-
Total deferred tax assets, gross	$	367,608		$	371,021
Less: valuation allowance	$	(362,536	)	$	(368,322	)
Total deferred tax assets, net	$	5,072		$	2,699
Deferred Tax Liabilities:
Right to use asset	$	(1,611	)	$	(366	)
Acquired intangibles		(2,373	)		(1,735	)
Lease receivable		(240	)		(58	)
Goodwill		(456	)		-
Acquired indefinite lived assets		(724	)		(688	)
Total deferred tax liabilities	$	(5,404	)	$	(2,847	)
Total deferred tax liabilities, net (indefinite-lived assets)	$	(332	)	$	(148	)

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 $5.8 million in the overall valuation allowance relates primarily to the expiration of federal tax attributes and the impact of current year acquisitions partially offset by operating losses for which we currently do not provide a tax benefit.  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 an indefinite-lived real property which is not depreciable for US GAAP purposes as well as indefinite-lived goodwill that is not amortizable for US GAAP purposes.  As a result of the sale of the patent licensing business in fiscal year 2016, the Company does not have any foreign deferred tax assets as of June 30, 2019, 2018 and 2017.

As of June 30, 2019, the Company has net operating loss (NOL) carryforwards for federal and state income tax purposes of approximately $1.6 billion and $199 million, respectively.  The federal NOL carryforwards generated prior to fiscal year 2018 will expire from 2020 through 2037.  The federal NOL carryforwards generated in fiscal year 2018 or later may be carried forward indefinitely.  The California NOL carryforwards will expire from 2029 through 2037.  The Massachusetts NOL carryforwards will expire from 2031 to 2037.

F-46

The following table reflects federal NOL carryforwards that will expire beginning in the fiscal year ended June 30, 2020 (in thousands):

Fiscal Year of Expiration	Federal NOL carryforwards
2020	$	174,877
2021		504,561
2022		143,137
2023		131,077
2024		60,132
2025 through 2037		603,819
Indefinite		8,157
Total	$	1,625,760

Under Code Section 382, the utilization of a corporation's NOL carryforwards is limited following a change in ownership (as defined by the Code) of greater than 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 2019, 2018 and 2017 fiscal years, the total amount of gross unrecognized tax benefit activity was as follows (in thousands):

Balance as of June 30, 2016	$	12,966
Addition for tax positions of prior years		-
Reductions for tax positions of prior years		(54	)
Lapse of statute of limitations		(176	)
Balance as of June 30, 2017		12,736
Addition for tax positions of prior years		39,027
Reductions for tax positions of prior years		-
Lapse of statute of limitations		(417	)
Balance as of June 30, 2018		51,346
Addition for tax positions of prior years		-
Reductions for tax positions of prior years		(13	)
Lapse of statute of limitations		(879	)
Balance as of June 30, 2019	$	50,454.00

During the year ended June 30, 2019, the Company’s unrecognized tax benefits decreased by $0.9 million due to the expiration of the Company’s historical research and development credits for which an unrecognized tax benefit had been established.  During the year ended June 30, 2018, the Company’s unrecognized tax benefits increased by $38.6 million due to uncertainties associated with its historical research and development credits.  During the year ended June 30, 2017, the Company’s unrecognized tax benefits decreased by $0.2 million due to the expiration of certain statutes of limitations reflected in discontinued operations.

As of June 30, 2019 and 2018, the Company had approximately $50.5 million and $51.3 million, respectively, of unrecognized tax benefits.  The unrecognized tax benefits, if recognized, would impact the effective tax rate by $50.5 million and $51.3 million, respectively, for the years ended June 30, 2019 and 2018, without considering the impact of the valuation allowance.

F-47

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, 2019 and 2018, 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, U.S. state and foreign tax returns.  Because of NOL carryforwards, substantially all of the Company's tax years, from the 1995 through 2019 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 2019 fiscal years, remain open to state tax examination.

15. Segment Information

The Company allocates resources based on four operating segments: durable medical equipment, investment management, real estate, and general corporate.  Prior to the acquisition of the investment management business in November 2016, the Company viewed all of its operations as a single integrated business.  No resources were allocated to the real estate business prior to the first real estate acquisition in March 2018 and no resources were allocated to the durable medical equipment business prior to the first durable medical equipment acquisition in September 2018.  All operations and assets are based in the United States.

The following tables summarize the results of operations by segment.

	For the year ended June 30, 2019
(in thousands)	Durable Medical Equipment(4)			Investment Management			Real Estate			General Corporate			Reconciliation to Consolidated Total(1)			Consolidated Total
Revenue:
Total revenue	$	41,880		$	3,841		$	5,459		$	123		$	(123	)	$	51,180
Operating costs and expenses:
Cost of durable medical equipment sold and services		(11,463	)		-			-			-			-			(11,463	)
Cost of durable medical equipment rentals		(5,798	)		-			-			-			-			(5,798	)
Depreciation and amortization		(1,323	)		(631	)		(1,729	)		-			-			(3,683	)
Stock-based compensation(2)		-			(521	)		-			(457	)		-			(978	)
Transaction costs(3)		(551	)		-			-			(1,582	)		-			(2,133	)
Other selling, general and administrative		(20,260	)		(3,504	)		(884	)		(6,904	)		123			(31,429	)
Total operating expenses		(39,395	)		(4,656	)		(2,613	)		(8,943	)		123			(55,484	)
Other income (expense):
Interest expense		(3,415	)		(180	)		(2,655	)		-			-			(6,250	)
Other income (expense)		(177	)		-			-			1,682			-			1,504
Total other income (expense), net		(3,592	)		(180	)		(2,655	)		1,682			-			(4,746	)
Total pre-tax income (loss) from continuing operations	$	(1,107	)	$	(995	)	$	191		$	(7,138	)	$	-		$	(9,050	)

F-48

	For the year ended June 30, 2018
(in thousands)	Durable Medical Equipment(4)		Investment Management			Real Estate(5)			General Corporate			Reconciliation to Consolidated Total		Consolidated Total
Revenue:
Total revenue	$	-	$	4,085		$	1,850		$	-		$	-	$	5,935
Operating costs and expenses:
Depreciation and amortization		-		(585	)		(538	)		(1	)		-		(1,124	)
Stock-based compensation(2)		-		(3,487	)		-			(938	)		-		(4,425	)
Other selling, general and administrative		-		(4,719	)		(375	)		(5,761	)		-		(10,855	)
Total operating expenses		-		(8,791	)		(913	)		(6,700	)		-		(16,404	)
Other income (expense):
Interest expense		-		(217	)		(854	)		-			-		(1,071	)
Other income (expense)		-		13			-			(143	)		-		(130	)
Total other income (expense), net		-		(204	)		(854	)		(143	)		-		(1,201	)
Total pre-tax income (loss) from continuing operations	$	-	$	(4,910	)	$	83		$	(6,843	)	$	-	$	(11,670	)

	For the year ended June 30, 2017
(in thousands)	Durable Medical Equipment(4)		Investment Management			Real Estate(5)		General Corporate			Reconciliation to Consolidated Total		Consolidated Total
Revenue:
Total revenue	$	-	$	4,927		$	-	$	-		$	-	$	4,927
Operating costs and expenses:
Depreciation and amortization		-		(340	)		-		-			-		(340	)
Stock-based compensation(2)		-		(1,434	)		-		(529	)		-		(1,963	)
Other selling, general and administrative		-		(3,345	)		-		(3,884	)		-		(7,229	)
Total operating expenses		-		(5,119	)		-		(4,413	)		-		(9,532	)
Other income (expense):
Interest expense		-		(285	)		-		(6,036	)		-		(6,321	)
Other income (expense)		-		(12	)		-		(7,712	)		-		(7,724	)
Total other income (expense), net		-		(297	)		-		(13,748	)		-		(14,045	)
Total pre-tax income (loss) from continuing operations	$	-	$	(489	)	$	-	$	(18,161	)	$	-	$	(18,650	)

(1) The Company’s wholly-owned subsidiary, Great Elm DME Manager, LLC (DME Manager), provides advisory services to DME Inc. and receives consulting fee from DME Inc. for those services. DME Manager is considered part of the general corporate segment of the Company. The corresponding expense to DME Inc. and revenue to DME Manager are eliminated in consolidation.

(2) 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.

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

(4) Our durable medical equipment business began in September 2018 and there was no related activity prior to that date.

(5) Our real estate business began in March 2018 and there was no related activity prior to that date.

F-49

The following tables summarize assets by segments:

	As of June 30, 2019
(in thousands)	Durable Medical Equipment		Investment Management		Real Estate		General Corporate		Total
Fixed assets, net	$	10,464	$	43	$	54,411	$	-	$	64,918
Identifiable intangible assets, net		9,297		2,910		5,369		-		17,576
Goodwill		50,397		-		-		-		50,397
Other assets		17,300		3,065		1,534		27,936		49,835
Total	$	87,458	$	6,018	$	61,314	$	27,936	$	182,726
	As of June 30, 2018
(in thousands)	Durable Medical Equipment		Investment Management		Real Estate		General Corporate		Total
Fixed assets, net	$	-	$	41	$	55,641	$	-	$	55,682
Identifiable intangible assets, net		-		3,531		5,869		-		9,400
Other assets		-		5,878		937		61,690		68,505
Total	$	-	$	9,450	$	62,447	$	61,690	$	133,587

16. Commitments and Contingencies

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

17. Discontinued Operations

On June 30, 2016, the Company sold two of its previously wholly-owned subsidiaries (the Divestiture) engaged in the patent licensing business for an aggregate purchase price of up to $40 million.  The purchaser paid the Company $30 million, plus certain adjustments, upon the closing of the Divestiture, and had made claims that it had incurred indemnifiable losses in excess of the remaining $10 million due under the purchase and sale agreement.

On January 21, 2019, we entered into a mutual release and settlement agreement with the purchaser resulting in the release of any indemnifiable liabilities and an incremental cash receipt of $1.5 million.  Prior to the execution of this settlement, the Company had determined that a loss related to final settlement with the purchaser was not realizable or estimable, and therefore had not accrued for any losses; however, the recognition of a portion of proceeds received associated with the former patent licensing business had been deferred pending finalization of all contingencies.  The settlement resulted in a $5.0 million gain in discontinued operations during the year ended June 30, 2019, consisting of the extinguishment of related liabilities of $3.6 million and the receipt of cash of $1.5 million from the purchaser, partially offset by legal fees of $0.1 million.  The net income from discontinued operations includes these gains, offset by a tax provision of $1.3 million for the year ended June 30, 2019.

F-50

The following table provides a reconciliation of the Company’s previous operations as reclassified for all of the periods presented:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Discontinued operations:
Net revenue	$	1,500		$	-		$	8,750
Patent licensing expenses(1)		-			-			(5,630	)
Extinguishment of liabilities related to discontinued operations		3,608			-			-
General and administrative expenses(2)		(87	)		(165	)		-
Pretax gain (loss) from discontinued operations		5,021			(165	)		3,120
Income tax benefit (expense)		(1,285	)		-			(917	)
Net gain (loss) from discontinued operations	$	3,736		$	(165	)	$	2,203

⁽¹⁾ Amounts for the year ended June 30, 2017 primarily consist of non-recurring fee split obligations associated with the Microsoft settlement as further discussed below.

⁽²⁾ During the year ended June 30, 2018, we incurred discontinued operating costs of $0.2 million related to the representations and warranties associated with the disposal of our legacy patent licensing business.

During the year ended June 30, 2017, the Company reached a final settlement with Microsoft Corporation for a one-time payment by Microsoft Corporation, related to an infringement judgment in our favor previously under appeal, of $8.8 million.  The payment, received in October 2016, included reimbursement of litigation costs incurred by the Company of approximately $1.9 million.  The settlement was paid to the Company as part of the Divesture and subject to fee split provisions.  During the year ended June 30, 2017, the Company paid $1.7 million with respect to its fee split obligations, all of which are classified as patent licensing expenses in the above table, with the purchaser of the divested subsidiaries.  As of June 30, 2018 and 2017, the Company has recorded estimated remaining fee share obligations associated with the Divesture totaling $3.6 million.

The Company did not allocate interest expense to discontinued operations and no general corporate overhead expenses have been reclassified to discontinued operations.

F-51

18. Quarterly Financial Results (Unaudited)

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, 2019.  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, 2019												Fiscal Year Ended June 30, 2018
	Fourth Quarter			Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Net revenues(1)	$	15,082		$	14,084		$	15,541		$	6,473		$	2,091		$	(448	)	$	2,523		$	1,769
Operating costs and expenses		16,659			14,601			15,308			8,916			4,652			3,088			3,527			5,137
Operating loss from continuing    operations	$	(1,577	)	$	(517	)	$	233		$	(2,443	)	$	(2,561	)	$	(3,536	)	$	(1,004	)	$	(3,368	)
Income (loss) from continuing    operations	$	(998	)	$	322		$	(4,251	)	$	(1,941	)	$	(2,521	)	$	(4,234	)	$	(1,202	)	$	(3,384	)
Income (loss) from    discontinued operations		(50	)		3,879			(25	)		(68	)		(10	)		(155	)		-			-
Net income (loss) attributable to    Great Elm Capital    Group, Inc.	$	(794	)	$	4,236		$	(4,346	)	$	(2,004	)	$	(2,507	)	$	(4,361	)	$	(1,169	)	$	(3,030	)
Basic income (loss) from    continuing operations per    share	$	(0.03	)	$	0.02		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.17	)	$	(0.05	)	$	(0.13	)
Basic income (loss) from    discontinued operations per    share		(0.00	)		0.15			(0.00	)		(0.00	)		(0.00	)		(0.01	)		-			-
Basic income (loss) per share	$	(0.03	)	$	0.17		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.18	)	$	(0.05	)	$	(0.13	)
Diluted income (loss) from    continuing operations per    share	$	(0.03	)	$	0.02		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.17	)	$	(0.05	)	$	(0.13	)
Diluted income (loss) from    discontinued operations per    share		(0.00	)		0.15			(0.00	)		(0.00	)		(0.00	)		(0.01	)		-			-
Diluted income (loss) per share	$	(0.03	)	$	0.17		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.18	)	$	(0.05	)	$	(0.13	)
Shares used in computing:
Basic income (loss) per share		25,335			25,265			25,187			25,054			24,712			24,612			24,562			23,233
Diluted income (loss) per       share		25,335			25,277			25,187			25,054			24,712			24,612			24,562			23,233

(1) Investment management revenues are net of incentive fee reversals determined based upon a hypothetical liquidation of net assets at March 31, 2018.  The incentive fee reversal is related to the conversion of Avanti third lien notes, an investment of GECC, to common equity in March 2018.

19. Subsequent Events

On July 1, 2019 we entered into an agreement to divest of our Arizona hospice operations within our durable medical equipment segment for $0.5 million.  The consideration received approximates the book value of assets to be transferred, which primarily consist of equipment held for rental.  This divestiture does not represent a strategic shift that will affect our operations and financial results.

F-52

SCHEDULE III

GREAT ELM CAPITAL GROUP, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION

June 30, 2019

(in thousands)			Initial cost to company				Gross amount of which carried at close of period(a)(b)									Life on which depreciation in latest
Description	Encumbrances		Land		Buildings and improvements		Land		Buildings and improvements		Total		Accumulated depreciation(a)		Date acquired	income statements is computed
Office buildings
Gartner I and II	$	55,438	$	9,170	$	46,855	$	9,170	$	46,855	$	56,025	$	1,614	03/06/18	(c)
Fort Myers, FL

(a) All property was acquired during the year ended June 30, 2018 as part of the real estate transaction described more fully in Note 4 of the Notes to the Consolidated Financial Statements.  Reconciliation of total real estate carrying value and accumulated depreciation for the years ended June 30, 2019 and 2018 are as follows:

(in thousands)	Real Estate		Accumulated Depreciation
Balance as of June 30, 2017	$	-	$	-
Acquisitions		56,025		-
Depreciation expense		-		384
Balance as of June 30, 2018		56,025		384
Depreciation expense		-		1,230
Balance as of June 30, 2019	$	56,025	$	1,614

(b) The aggregate cost for federal income tax purposes was $64.5 million at June 30, 2019.

(c) Depreciation is computed based on the following estimated lives:

Description	Life in Years
Real Estate Assets
Buildings	55
Site improvements	16
Tenant improvements	12

S-1

EX-4.5

Exhibit 4.5

Description of Great Elm Capital Group, Inc.’s Securities

As of September 27, 2019, Great Elm Capital Group, Inc. has three classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: (i) our common stock, (ii) our preferred stock purchase rights and (iii) our units.

The following is a summary description of such securities and does not purport to be complete.  For a complete description of the terms and provisions of such securities, refer to our Amended and Restated Certificate of Incorporation (our Charter), Amended and Restated Bylaws (our Bylaws) and Rights Agreement (as defined below).  This summary description is qualified in its entirety by reference to these documents, each of which is included as an exhibit to the Annual Report on Form 10-K to which this exhibit is a part.

Authorized Capital Stock

Pursuant to our Charter, our authorized capital stock consists of 1,000,000,000 shares of common stock, $0.001 par value per share, and 5,000,000 shares of preferred stock, $0.001 par value per share.  

Common Stock

Voting and Other Rights

Holders of shares of our common stock are entitled to one vote for each share held of record on all matters to be voted on by our stockholders, including the election of directors.  Our Charter and our Bylaws do not provide for cumulative voting rights.  Because of this, the holders of a majority of our common stock entitled to vote in any election of directors can elect all of the directors standing for election.  

Dividends

Subject to the preferences that may be applicable to any then outstanding preferred stock, the holders of our outstanding shares of common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors (our Board) out of legally available funds.

Liquidation, Redemption and Preemptive Rights

In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.  Holders of our common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to our common stock.  The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.

Listing

Our common stock is listed on The Nasdaq Global Select Market under the symbol “GEC.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

Preferred Stock

Pursuant to our Charter, our Board has the authority, without further action by the stockholders (unless such stockholder action is required by applicable law or the Nasdaq Stock Market rules), to designate and issue up to 5,000,000 shares of preferred stock in one or more series, to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of preferred stock and the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issuance of that series, but not below the number of shares of such series then outstanding.

The Delaware General Corporation Law (the DGCL) provides that the holders of preferred stock will have the right to vote separately as a class (or, in some cases, as a series) on an amendment to our Charter if the amendment would change the par value, the number of authorized shares of the class or the powers, preferences or special rights of the class or series so as to adversely affect the class or series, as the case may be.  This right is in addition to any voting rights that may be provided for in the applicable certificate of designation.

Our Board may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock.  The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock.  Additionally, the issuance of preferred stock may have the effect of decreasing the market price of our common stock.

Delaware Anti-Takeover Law and Provisions of our Charter and our Bylaws

Delaware Anti-Takeover Law

We are subject to Section 203 of the DGCL.  Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

▪ prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

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▪ upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

▪ on or subsequent to the date of the transaction, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66^2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Section 203 defines a business combination to include:

▪ any merger or consolidation involving the corporation and the interested stockholder;

▪ any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

▪ subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; and

▪ the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation or any entity or person affiliated with or controlling or controlled by the entity or person.

Charter and Bylaws

Provisions of our Charter and our Bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares or transactions that our stockholders might otherwise deem to be in their best interests.  Therefore, these provisions could adversely affect the price of our common stock.  Among other things, our Charter and our Bylaws:

▪ permit our Board to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate;

▪ provide that the authorized number of directors may be fixed from time to time by a bylaw or amendment or by one or more resolutions duly adopted by our Board;

▪ provide that any vacancies resulting from death, resignation, disqualification, removal, or other causes, as well as newly created directorships, may, except as otherwise required by law and subject to the rights of the holders of any series of preferred stock, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum or vote of the holders of a majority of the voting power of the then-outstanding shares;

- 3 -

▪ require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;

▪ provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice; do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of our common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); and provide that special meetings of our stockholders may be called only by our Board; and

▪ restricts any direct or indirect transfer (such as transfers of our stock that result from the transfer of interests in other entities that own our stock) if the effect would be to (a) increase the direct or indirect ownership of our stock by any Person (as defined below) from less than 4.99% to 4.99% or more; or (b) increase the percentage of our common stock owned directly or indirectly by a Person owning or deemed to own 4.99% or more of our common stock.

“Person” means any individual, firm, corporation or other legal entity, including persons treated as an entity pursuant to Treasury Regulation §1.382-3(a)(1)(i), and includes any successor (by merger or otherwise) of such entity.

Restricted transfers include sales to Persons whose resulting percentage ownership (direct or indirect) of our common stock would exceed the 4.99% thresholds discussed above or to Persons whose direct or indirect ownership of our common stock would by attribution cause another Person to exceed such threshold.  Complicated common stock ownership rules prescribed by the Internal Revenue Code of 1986, as amended (the Code), and regulations issued thereunder, will apply in determining whether a Person is a 4.99% stockholder under the transfer restriction in our Charter.  A transfer from one member of a “public group” (as that term is defined under Section 382 of the Code) to another member of the same public group does not increase the percentage of our common stock owned directly or indirectly by the public group, and, therefore, such transfers are not restricted.

For purposes of determining the existence and identity of, and the amount of our common stock owned by, any stockholder, we will be entitled to rely on the existence or absence of certain public securities filings as of any date, subject to our actual knowledge of the ownership of our common stock.  Our Charter includes our right to require a proposed transferee, as a condition to registration of a transfer of our common stock, to provide all information reasonably requested regarding such person’s direct and indirect ownership of our common stock.

Any of these provisions may be amended by a majority of our Board.

- 4 -

Preferred Stock Purchase Rights and Units

Stockholders’ Rights Agreement

On January 28, 2018, our Board adopted a Stockholders’ Rights Agreement (the Rights Agreement) to replace the then-existing Tax Benefits Preservation Agreement, which expired on January 29, 2018.

Description of Rights Plan

The Rights Agreement is designed to preserve our tax assets and to prevent a person or group from acquiring more than 9.9% of our outstanding capital stock without negotiating with our Board.  The possibility of a person or group exerting influence over our Board or business from a minority investment position could harm our ability to create long-term value for all stockholders.

Rights Dividend

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

Distribution Date

Initially, the Rights are not exercisable and are attached to and trade with all shares of common stock outstanding as of, and issued subsequent to, the Record Date.  The Rights will separate from the common stock and will become exercisable upon the earlier of:

▪ the close of business on the tenth business day following the first public announcement that a person or group of affiliated or associated persons (an Acquiring Person) has acquired beneficial ownership (as defined in the Rights Agreement using definitions from the Code and the rules and regulations thereunder) of 4.99% or more of the outstanding shares of common stock, other than as a result of repurchases of stock by us or certain inadvertent actions by a stockholder;

▪ the close of business on the tenth business day following the first public announcement that an Acquiring Person has acquired beneficial ownership (as defined under the Rights Agreement using definitions from the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations thereunder) of 9.99% or more of the outstanding shares of common stock, other than as a result of repurchases of stock by us or certain inadvertent actions by a stockholder (the date of announcement under this or the preceding bullet, the Stock Acquisition Date); or

- 5 -

▪ the close of business on the tenth business day (or such later day as the Independent Directors (as defined in the Rights Agreement) may determine) following the commencement of a tender offer or exchange offer that could result, upon its consummation, in a person or group becoming the beneficial owner of 4.99% (using the tax definitions) or 9.99% (using the Exchange Act definitions) or more of the outstanding shares of common stock (the earlier of such dates being herein referred to as the Distribution Date).

Notwithstanding the foregoing, with respect to any person:

▪ who beneficially owns using the tax definitions 4.99% or more of the outstanding shares of common stock as of the Record Date; or

▪ who beneficially owns using the Exchange Act definitions 9.99% or more of the outstanding shares of common stock as of the record date (such persons being referred to in the Rights Agreement as a Grandfathered Person),

the Distribution Date will not occur unless such Grandfathered Person has acquired beneficial ownership of shares of common stock representing an additional 1/2% of the outstanding shares of common stock beneficially owned as of the Record Date, for any other Grandfathered Person not listed on Schedule A of the Rights Agreement (the Grandfathered Percentage).

Until the Distribution Date (or earlier redemption, exchange or expiration of the Rights):

▪ the Rights will be evidenced by the common stock certificates and will be transferred with and only with such common stock certificates;

▪ new common stock certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference; and

▪ the surrender for transfer of any certificates for common stock will also constitute the transfer of the Rights associated with the common stock represented by such certificate.

As soon as practicable after the Distribution Date, one or more certificates evidencing one Right for each share of common stock held by us, subject to adjustment as provided herein (the Right Certificates) will be mailed to holders of record of common stock as of the close of business on the Distribution Date and, thereafter, the separate Right Certificates alone will represent the Rights.  Except as otherwise determined by the Independent Directors, only shares of common stock issued prior to the Distribution Date will be issued with Rights.

Process for Potential Exemption

Any person who wishes to effect any acquisition of shares of common stock that would, if consummated, result in such person

▪ beneficially owning (using the tax definitions) more than 4.99% of the outstanding shares of common stock;

- 6 -

▪ beneficially owning (using the Exchange Act definitions) more than 9.99% of the outstanding shares of common stock; or

▪ a Grandfathered Person beneficially owning more than the Grandfathered Percentage,

may request that our Independent Directors grant an exemption with respect to such acquisition under the Rights Agreement.  Our Independent Directors may deny such an exemption request if they determine, in their sole discretion, that the acquisition of beneficial ownership of common stock by such person could jeopardize or endanger the availability to us of the net operating losses or for whatever other reason they deem reasonable, desirable or appropriate.  Any exemption granted may be granted in whole or in part, and may be subject to limitations or conditions (including a requirement that the person agree that it will not acquire beneficial ownership of shares of common stock in excess of the maximum number and percentage of shares approved by our Independent Directors or that it will not request another exemption).

Subscription and Merger Rights

In the event that a Stock Acquisition Date occurs, proper provision will be made so that each holder of a Right (other than an Acquiring Person or its associates or affiliates, whose Rights shall become null and void) will thereafter have the right to receive upon exercise, in lieu of a number of Units of Series A Preferred Stock, that number of shares of our common stock (or, in certain circumstances, including if there are insufficient shares of common stock to permit the exercise in full of the Rights, Units of Series A Preferred Stock, other securities, cash or property, or any combination of the foregoing) having a market value of two times the Exercise Price of the Right (such right being referred to as the Subscription Right).  If, at any time following the Stock Acquisition Date:

▪ we consolidate with, or merge with and into, any other person, and we are not the continuing or surviving corporation;

▪ any person consolidates with us or merges with and into us and we are the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the shares of our common stock are changed into or exchanged for stock or other securities of any other person or cash or any other property; or

▪ 50% or more of our assets or earning power is sold, mortgaged or otherwise transferred,

each holder of a Right (other than an Acquiring Person or its associates or affiliates, whose Rights shall become null and void) will thereafter have the right to receive, upon exercise, common stock of the acquiring company having a market value equal to two times the Exercise Price of the Right (the Merger Right).

The holder of a Right will continue to have the Merger Right whether or not such holder has exercised the Subscription Right.  Rights that are or were beneficially owned by an Acquiring Person may (under certain circumstances specified in the Rights Agreement) become null and void.

- 7 -

Until a Right is exercised, the holder will have no rights as a stockholder of our company (beyond those as an existing stockholder), including the right to vote or to receive dividends.  While the distribution of the Rights will not be taxable to stockholders or to us, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Units, other securities of ours, other consideration or for common stock of an acquiring company.

Exchange Feature

At any time after a person becomes an Acquiring Person, our Independent Directors may, at their option, exchange all or any part of the then outstanding and exercisable Rights for shares of common stock or Units at an exchange ratio specified in the Rights Agreement.  Notwithstanding the foregoing, our Independent Directors generally will not be empowered to effect such exchange at any time after any person becomes the beneficial owner of 50% or more of our common stock.

Adjustments

The Exercise Price payable, and the number of Units or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution

▪ in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series A Preferred Stock;

▪ if holders of the Series A Preferred Stock are granted certain rights or warrants to subscribe for Series A Preferred Stock or convertible securities at less than the current market price of the Series A Preferred Stock; or

▪ upon the distribution to holders of the Series A Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).

With certain exceptions, no adjustment in the Exercise Price will be required until cumulative adjustments amount to at least 1% of the Exercise Price.  We are not obligated to issue fractional Units.  If we elect not to issue fractional Units, in lieu thereof an adjustment in cash will be made based on the fair market value of the Series A Preferred Stock on the last trading date prior to the date of exercise.

Redemption

The Rights may be redeemed in whole, but not in part, at a price of $0.001 per Right (payable in cash, common stock or other consideration deemed appropriate by our Independent Directors) by our Independent Directors only until the earlier of (i) 10 days after any person becomes an Acquiring Person or (ii) the expiration date of the Rights Agreement.  Immediately upon the action of our Independent Directors ordering redemption of the Rights, the Rights will terminate and thereafter the only right of the holders of Rights will be to receive the redemption price.

- 8 -

Amendment

Our Independent Directors in their sole discretion at any time prior to the time at which any person becomes an Acquiring Person may amend the Rights Agreement.  After such time our Independent Directors may, subject to certain limitations set forth in the Rights Agreement, amend the Rights Agreement only to cure any ambiguity, defect or inconsistency, to shorten or lengthen any time period, or to make changes that do not adversely affect the interests of Rights holders (excluding the interests of an Acquiring Person or its associates or affiliates).

Expiration Date

The Rights are not exercisable until the Distribution Date and will expire at the earlier of:

▪ the time when the Rights are redeemed as provided therein;

▪ the time when the Rights are exchanged as provided therein;

▪ the repeal of Section 382 of the Code if our Independent Directors determine that the Rights Agreement is no longer necessary for the preservation of Tax Benefits (as defined in the Rights Agreement);

▪ the beginning of our taxable year to which our Board determines that no Tax Benefits may be carried forward; or

▪ the close of business on January 29, 2028.

- 9 -

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

Name	Jurisdiction of organization
Alliance Homecare, LLC	Arizona
CRIC IT Fort Myers LLC	Delaware
GECC GP Corp.	Delaware
Focus Respiratory, LLC	Arizona
Great Elm Capital Management, Inc.	Delaware
Great Elm DME, Inc.	Delaware
Great Elm DME Holdings, Inc.	Delaware
Great Elm DME Manager, LLC	Delaware
Great Elm FM Acquisition, Inc.	Delaware
Great Elm FM Holdings, Inc.	Delaware
Great Elm Opportunities GP, Inc.	Delaware
Heartland Health Therapy, LLC	Arizona
Northwest Medical, LLC	Oregon
Openwave Systems Service India Private LTD.	India
Openwave Systems (South Africa) Pty LTD	South Africa
Openwave Technologies Inc.	Delaware
Signalsoft Corporation	California
Solomio Corporation	Delaware
RejuveNight, LLC	Arizona
RTA Homecare, LLC	Arizona
United Respiratory Services, LLC	Arizona

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-228968, 333-191605 and 333-215518 on Form S-3, and Registration Statement Nos. 333-227913, 333-214401, 333-192800, 333-163480, 333-156444, and 333-140691 on Form S-8 of our reports dated September 27, 2019, relating to the consolidated financial statements and financial statement schedule of Great Elm Capital Group, Inc. (the “Company”) and the effectiveness of the Company’s internal control over financial reporting as of June 30, 2019 (which report expresses an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of material weaknesses), appearing in this Annual Report on Form 10-K of the Company for the year ended June 30, 2019.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

September 27, 2019

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-228968, 333-191605 and 333-215518 on Form S-3, and Registration Nos. 333-227913, 333-214401, 333-192800, 333-163480, 333-156444 and 333-140691 on Form S-8 of Great Elm Capital Group, Inc. of  our report dated March 13, 2019 relating to the financial statements of Great Elm Capital Corp. incorporated by reference in this Annual Report on Form 10-K of Great Elm Capital Group, Inc. for the year ended June 30, 2019.

/s/ Deloitte & Touche LLP

McLean, VA

September 27, 2019

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Peter A. Reed, certify that:

1. I have reviewed this annual report on Form 10-K of Great Elm Capital Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	September 27, 2019
By:	/s/ Peter A. Reed
Name:	Peter A. Reed
Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Brent J. Pearson, certify that:

1. I have reviewed this annual report on Form 10-K of Great Elm Capital Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	September 27, 2019
By:	/s/ Brent J. Pearson
Name:	Brent J. Pearson
Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter A. Reed, as Chief Executive Officer of Great Elm Capital Group, Inc. (the “Company”) certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. the accompanying Form 10-K report for the period ending June 30, 2019 as filed with the U.S. Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	September 27, 2019
By:	/s/ Peter A. Reed
Name:	Peter A. Reed
Title:	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Brent J. Pearson, as Chief Financial Officer of Great Elm Capital Group, Inc. (the “Company”) certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. the accompanying Form 10-K report for the period ending June 30, 2019 as filed with the U.S. Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	September 27, 2019
By:	/s/ Brent J. Pearson
Name:	Brent J. Pearson
Title:	Chief Financial Officer

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Subsequent Events

12 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

19. Subsequent Events

On July 1, 2019 we entered into an agreement to divest of our Arizona hospice operations within our durable medical equipment segment for $0.5 million.  The consideration received approximates the book value of assets to be transferred, which primarily consist of equipment held for rental.  This divestiture does not represent a strategic shift that will affect our operations and financial results.

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Segment Information

12 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Information

15. Segment Information

The Company allocates resources based on four operating segments: durable medical equipment, investment management, real estate, and general corporate.  Prior to the acquisition of the investment management business in November 2016, the Company viewed all of its operations as a single integrated business.  No resources were allocated to the real estate business prior to the first real estate acquisition in March 2018 and no resources were allocated to the durable medical equipment business prior to the first durable medical equipment acquisition in September 2018.  All operations and assets are based in the United States.

The following tables summarize the results of operations by segment.

	For the year ended June 30, 2019
(in thousands)	Durable Medical Equipment(4)			Investment Management			Real Estate			General Corporate			Reconciliation to Consolidated Total(1)			Consolidated Total
Revenue:
Total revenue	$	41,880		$	3,841		$	5,459		$	123		$	(123	)	$	51,180
Operating costs and expenses:
Cost of durable medical equipment sold and services		(11,463	)		-			-			-			-			(11,463	)
Cost of durable medical equipment rentals		(5,798	)		-			-			-			-			(5,798	)
Depreciation and amortization		(1,323	)		(631	)		(1,729	)		-			-			(3,683	)
Stock-based compensation(2)		-			(521	)		-			(457	)		-			(978	)
Transaction costs(3)		(551	)		-			-			(1,582	)		-			(2,133	)
Other selling, general and administrative		(20,260	)		(3,504	)		(884	)		(6,904	)		123			(31,429	)
Total operating expenses		(39,395	)		(4,656	)		(2,613	)		(8,943	)		123			(55,484	)
Other income (expense):
Interest expense		(3,415	)		(180	)		(2,655	)		-			-			(6,250	)
Other income (expense)		(177	)		-			-			1,682			-			1,504
Total other income (expense), net		(3,592	)		(180	)		(2,655	)		1,682			-			(4,746	)
Total pre-tax income (loss) from continuing operations	$	(1,107	)	$	(995	)	$	191		$	(7,138	)	$	-		$	(9,050	)

	For the year ended June 30, 2018
(in thousands)	Durable Medical Equipment(4)		Investment Management			Real Estate(5)			General Corporate			Reconciliation to Consolidated Total		Consolidated Total
Revenue:
Total revenue	$	-	$	4,085		$	1,850		$	-		$	-	$	5,935
Operating costs and expenses:
Depreciation and amortization		-		(585	)		(538	)		(1	)		-		(1,124	)
Stock-based compensation(2)		-		(3,487	)		-			(938	)		-		(4,425	)
Other selling, general and administrative		-		(4,719	)		(375	)		(5,761	)		-		(10,855	)
Total operating expenses		-		(8,791	)		(913	)		(6,700	)		-		(16,404	)
Other income (expense):
Interest expense		-		(217	)		(854	)		-			-		(1,071	)
Other income (expense)		-		13			-			(143	)		-		(130	)
Total other income (expense), net		-		(204	)		(854	)		(143	)		-		(1,201	)
Total pre-tax income (loss) from continuing operations	$	-	$	(4,910	)	$	83		$	(6,843	)	$	-	$	(11,670	)

	For the year ended June 30, 2017
(in thousands)	Durable Medical Equipment(4)		Investment Management			Real Estate(5)		General Corporate			Reconciliation to Consolidated Total		Consolidated Total
Revenue:
Total revenue	$	-	$	4,927		$	-	$	-		$	-	$	4,927
Operating costs and expenses:
Depreciation and amortization		-		(340	)		-		-			-		(340	)
Stock-based compensation(2)		-		(1,434	)		-		(529	)		-		(1,963	)
Other selling, general and administrative		-		(3,345	)		-		(3,884	)		-		(7,229	)
Total operating expenses		-		(5,119	)		-		(4,413	)		-		(9,532	)
Other income (expense):
Interest expense		-		(285	)		-		(6,036	)		-		(6,321	)
Other income (expense)		-		(12	)		-		(7,712	)		-		(7,724	)
Total other income (expense), net		-		(297	)		-		(13,748	)		-		(14,045	)
Total pre-tax income (loss) from continuing operations	$	-	$	(489	)	$	-	$	(18,161	)	$	-	$	(18,650	)

(1) The Company’s wholly-owned subsidiary, Great Elm DME Manager, LLC (DME Manager), provides advisory services to DME Inc. and receives consulting fee from DME Inc. for those services. DME Manager is considered part of the general corporate segment of the Company. The corresponding expense to DME Inc. and revenue to DME Manager are eliminated in consolidation.

(2) 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.

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

(4) Our durable medical equipment business began in September 2018 and there was no related activity prior to that date.

(5) Our real estate business began in March 2018 and there was no related activity prior to that date.

The following tables summarize assets by segments:

	As of June 30, 2019
(in thousands)	Durable Medical Equipment		Investment Management		Real Estate		General Corporate		Total
Fixed assets, net	$	10,464	$	43	$	54,411	$	-	$	64,918
Identifiable intangible assets, net		9,297		2,910		5,369		-		17,576
Goodwill		50,397		-		-		-		50,397
Other assets		17,300		3,065		1,534		27,936		49,835
Total	$	87,458	$	6,018	$	61,314	$	27,936	$	182,726
	As of June 30, 2018
(in thousands)	Durable Medical Equipment		Investment Management		Real Estate		General Corporate		Total
Fixed assets, net	$	-	$	41	$	55,641	$	-	$	55,682
Identifiable intangible assets, net		-		3,531		5,869		-		9,400
Other assets		-		5,878		937		61,690		68,505
Total	$	-	$	9,450	$	62,447	$	61,690	$	133,587

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Non-Controlling Interests and Preferred Stock of Subsidiary - Summary of Non-controlling Interest Balance on Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Balance as of
NCI classified as temporary equity	$ 3,912
Total	7,928	$ 222
DME, Inc.
Balance as of
NCI classified as temporary equity	3,912
NCI classified as permanent equity	3,912
Total DME Inc.	7,824
GECC GP Corp.
Balance as of
NCI classified as permanent equity	(626)	(465)
GE FM Holdings
Balance as of
NCI classified as permanent equity	$ 730	$ 687

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Income Taxes - Reconciliation of Expected Federal Income Tax Expense Benefit (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Income Tax Disclosure [Abstract]
Federal benefit at statutory rate	$ (1,900)	$ (3,268)	$ (6,523)
State taxes	(427)	(301)	(794)
Permanent adjustments	36	4	22
Change in valuation allowance	(5,788)	(248,923)	6,230
Provision to return true-up	(134)	125	(87)
Deferred remeasurement	(174)	239,608
Net operating loss and credit expirations	6,335	11,805
Stock compensation adjustment	(122)	607
Other	(8)	14	(58)
Total Tax Expense/(Benefit)	$ (2,182)	$ (329)	$ (1,210)

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Lessor Operating Leases - Additional Information (Details) $ in Millions	12 Months Ended
	Jun. 30, 2019 USD ($) Property
Gartner I and Gartner II
Lessor Lease Description [Line Items]
Number of office buildings | Property	2
Lessor, lease option to extend	The Gartner I lease contains two five-year extensions and the Gartner II lease contains three five-year extensions
Existence of option to extend operating lease	true
Lessor, lease renewal rate	95.00%
Monthly base lease payments | $	$ 0.4
Minimum
Lessor Lease Description [Line Items]
Lessor, lease terms	10 months
Maximum
Lessor Lease Description [Line Items]
Lessor, lease terms	36 months

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Related Party Transactions - Schedule of Activity and Outstanding Balances Between GECC and Company (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Related Party Transaction [Line Items]
Change in unrealized gain (loss) on investment in GECC recorded in the period	$ (1,062)	$ (2,714)	$ (9,114)
GECC
Related Party Transaction [Line Items]
Change in unrealized gain (loss) on investment in GECC recorded in the period	(1,062)	(2,714)	(9,114)
GECC dividends recorded in the period	2,431	2,352	$ 1,306
Dividends receivable from GECC	206	163
Investment management revenues receivable from GECC	$ 1,124	$ 4,094

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Segment Information - Additional Information (Details)	12 Months Ended
	Jun. 30, 2019 Segment
Segment Reporting [Abstract]
Number of operating segments	4

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Stockholders' Equity - Summary of Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Shares
Beginning Balance	2,676,000
Options granted	110,000
Exercised	(44,000)	0
Forfeited, cancelled or expired	(86,000)
Ending Balance	2,656,000	2,676,000
Exercisable	1,717,000
Vested and expected to vest	2,656,000
Weighted average exercise price
Beginning Balance	$ 4.31
Options granted	3.74
Exercised	3.25
Forfeited, cancelled or expired	3.62
Ending Balance	4.33	$ 4.31
Exercisable	4.72
Vested and expected to vest	$ 4.33
Weighted average remaining contractual term
Outstanding	6 years 5 months 26 days	7 years 5 months 8 days
Exercisable	5 years 5 months 12 days
Vested and expected to vest	6 years 5 months 26 days
Aggregate intrinsic value
Outstanding	$ 1,590	$ 70
Exercisable	945
Vested and expected to vest	$ 1,590

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Fair Value Measurements - Reconciliation of Changes in Contingent Consideration, Level 3 Liability (Details)	12 Months Ended
	Jun. 30, 2019 USD ($)
Fair Value Disclosures [Abstract]
Beginning balance	$ 0
Additions	961,000
Payments	(295,000)
Change in fair value	469,000
Ending balance	$ 1,135,000

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Income Taxes - Additional Information (Details) - USD ($)		12 Months Ended
	Dec. 22, 2017	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Income Taxes [Line Items]
Federal corporate income tax rate	35.00%	21.00%	28.06%		35.00%
Effect of reduction in corporate income tax		$ 239,400,000
Loss from continuing operations, before provision for income taxes		9,050,000	$ 11,670,000		$ 18,650,000
Income tax benefit		(2,182,000)	(329,000)		(1,210,000)
Income tax for the period					1,200,000
Income tax expense (benefit) from discontinued operations		1,285,000	0		917,000
Accrued taxes for divested foreign subsidiaries					300,000
Decrease in valuation allowance		5,800,000
Federal net operating loss carryforwards		1,625,760,000
Operating loss carryforward for state income tax		$ 199,000,000
Net operating loss carryforwards description		Under Code Section 382, the utilization of a corporation's NOL carryforwards is limited following a change in ownership (as defined by the Code) of greater than 50% within a rolling three-year period.
Tax benefits preservation agreement, minimum increase of collective ownership of aggregate amount of outstanding shares		50.00%
Tax benefits preservation agreement, ownership change period		3 years
Increase in unrecognized tax benefits due to tax attributes			38,600,000
Decrease in unrecognized tax benefits due to tax attributes		$ 900,000		$ 200,000
Total unrecognized tax benefits that, if recognized would affect effective tax rate		50,500,000	51,300,000
Unrecognized tax benefits		50,500,000	51,300,000
Interest accrued for tax liabilities		$ 0	0
Minimum | California
Income Taxes [Line Items]
Operating loss carryforwards expiration period		2029
Minimum | Massachusetts
Income Taxes [Line Items]
Operating loss carryforwards expiration period		2031
Minimum | Federal
Income Taxes [Line Items]
Operating loss carryforwards expiration period		2020
Maximum | California
Income Taxes [Line Items]
Operating loss carryforwards expiration period		2037
Maximum | Massachusetts
Income Taxes [Line Items]
Operating loss carryforwards expiration period		2037
Maximum | Federal
Income Taxes [Line Items]
Operating loss carryforwards expiration period		2037
Mediation And Messaging Businesses
Income Taxes [Line Items]
Foreign deferred tax assets		$ 0	$ 0		$ 0
Durable Medical Equipment
Income Taxes [Line Items]
Income tax benefit acquired to deferred tax liabilities		$ 900,000

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Discontinued Operations - Reconciliation of Previous Operations as Reclassified for All Periods Presented (Details) - USD ($) $ in Thousands		3 Months Ended						12 Months Ended
		Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Discontinued operations:
Net revenue								$ 1,500		$ 8,750
Patent licensing expenses	[1]									(5,630)
Extinguishment of liabilities related to discontinued operations								3,608
General and administrative expenses	[2]							(87)	$ (165)
Pretax gain (loss) from discontinued operations								5,021	(165)	3,120
Income tax benefit (expense)								(1,285)	0	(917)
Net gain (loss) from discontinued operations		$ (50)	$ 3,879	$ (25)	$ (68)	$ (10)	$ (155)	$ 3,736	$ (165)	$ 2,203

[1] Amounts for the year ended June 30, 2017 primarily consist of non-recurring fee split obligations associated with the Microsoft settlement as further discussed below.

[2] During the year ended June 30, 2018, we incurred discontinued operating costs of $0.2 million related to the representations and warranties associated with the disposal of our legacy patent licensing business.

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Income Taxes (Tables)

12 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes includes the following:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Current:
Domestic Income Tax	$	84		$	-		$	-
Foreign Income Tax		-			-			-
	$	84		$	-		$	-
Deferred:
Domestic Income Tax	$	(2,266	)	$	(329	)	$	(1,210	)
Foreign Income Tax		-			-			-
	$	(2,266	)	$	(329	)	$	(1,210	)
Total	$	(2,182	)	$	(329	)	$	(1,210	)

Reconciliation of Expected Federal Income Tax Expense (Benefit)

The following table reconciles the expected corporate federal income tax expense (benefit), computed by multiplying the Company's income (loss) before income taxes by the statutory income tax rate of 21% for fiscal year 2019, 28.06% for fiscal year 2018 and 35% for fiscal year 2017:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Federal benefit at statutory rate	$	(1,900	)	$	(3,268	)	$	(6,523	)
State taxes		(427	)		(301	)		(794	)
Permanent adjustments		36			4			22
Change in valuation allowance		(5,788	)		(248,923	)		6,230
Provision to return true-up		(134	)		125			(87	)
Deferred remeasurement		(174	)		239,608			-
Net operating loss and credit expirations		6,335			11,805			-
Stock compensation adjustment		(122	)		607			-
Other		(8	)		14			(58	)
Total Tax Expense/(Benefit)	$	(2,182	)	$	(329	)	$	(1,210	)

Schedule of Tax Effect of Temporary Differences of Deferred Tax Assets and Liabilities

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

	As of June 30,
(in thousands)	2019			2018
Deferred Tax Assets:
Net operating loss carryforwards	$	358,913		$	365,546
Accruals and allowances not deductible for tax purposes		2,399			1,945
Stock based compensation		799			684
Unrealized loss on investment		3,299			2,846
Lease liability		1,298			-
Interest expense carryforward		900			-
Total deferred tax assets, gross	$	367,608		$	371,021
Less: valuation allowance	$	(362,536	)	$	(368,322	)
Total deferred tax assets, net	$	5,072		$	2,699
Deferred Tax Liabilities:
Right to use asset	$	(1,611	)	$	(366	)
Acquired intangibles		(2,373	)		(1,735	)
Lease receivable		(240	)		(58	)
Goodwill		(456	)		-
Acquired indefinite lived assets		(724	)		(688	)
Total deferred tax liabilities	$	(5,404	)	$	(2,847	)
Total deferred tax liabilities, net (indefinite-lived assets)	$	(332	)	$	(148	)

Schedule of Federal Net Operating Loss Carryforwards

The following table reflects federal NOL carryforwards that will expire beginning in the fiscal year ended June 30, 2020 (in thousands):

Fiscal Year of Expiration	Federal NOL carryforwards
2020	$	174,877
2021		504,561
2022		143,137
2023		131,077
2024		60,132
2025 through 2037		603,819
Indefinite		8,157
Total	$	1,625,760

Schedule of Gross Unrecognized Tax Benefit Activity

During the 2019, 2018 and 2017 fiscal years, the total amount of gross unrecognized tax benefit activity was as follows (in thousands):

Balance as of June 30, 2016	$	12,966
Addition for tax positions of prior years		-
Reductions for tax positions of prior years		(54	)
Lapse of statute of limitations		(176	)
Balance as of June 30, 2017		12,736
Addition for tax positions of prior years		39,027
Reductions for tax positions of prior years		-
Lapse of statute of limitations		(417	)
Balance as of June 30, 2018		51,346
Addition for tax positions of prior years		-
Reductions for tax positions of prior years		(13	)
Lapse of statute of limitations		(879	)
Balance as of June 30, 2019	$	50,454.00

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Organization (Details) - Segment	12 Months Ended
	Jun. 30, 2019	Sep. 07, 2018
Number of operating segments	4
MAST
Ownership percentage in parent company	7.90%
GP Corp.
Percentage of equity interest acquired (as a percent)	80.10%
Noncontrolling Interest of GP Corp	19.90%
GP Corp. | MAST
Noncontrolling Interest owned by MAST	5.00%
Great Elm DME Holdings Incorporation
Percentage of equity interest acquired (as a percent)		80.10%

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Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2016
Statement Of Cash Flows [Abstract]
Cash and cash equivalents	$ 12,122	$ 42,962	$ 45,894
Restricted cash	708	578
Cash, cash equivalents and restricted cash	$ 12,830	$ 43,540	$ 45,894	$ 80,711

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Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Revenues:
Revenue from contract with customer	$ 31,139	$ 4,085	$ 4,927
Rental income	20,041	1,850
Revenue	51,180	5,935	4,927
Operating costs and expenses:
Durable medical equipment other operating expenses	20,127
Depreciation and amortization	3,683	1,124	340
Selling, general and administrative	9,504	6,699	4,413
Total operating costs and expenses	55,484	16,404	9,532
Operating loss	(4,304)	(10,469)	(4,605)
Dividends and interest income	2,565	2,579	1,306
Unrealized loss on investment in GECC	(1,062)	(2,714)	(9,114)
Interest expense	(6,250)	(1,071)	(6,321)
Other income, net	1	5	84
Loss from continuing operations, before income taxes	(9,050)	(11,670)	(18,650)
Benefit from income taxes	2,182	329	1,210
Loss from continuing operations	(6,868)	(11,341)	(17,440)
Discontinued operations:
Income (loss) from discontinued operations, net of tax	3,736	(165)	2,203
Net loss	(3,132)	(11,506)	(15,237)
Less: net income (loss) attributable to non-controlling interest	(224)	(439)	(30)
Net income (loss) attributable to Great Elm Capital Group	$ (2,908)	$ (11,067)	$ (15,207)
Basic income (loss) per share
Continuing operations	$ (0.26)	$ (0.45)	$ (1.06)
Discontinued operations	0.15	(0.01)	0.13
Net income (loss)	(0.11)	(0.46)	(0.93)
Diluted income (loss) per share from:
Continuing operations	(0.26)	(0.45)	(1.06)
Discontinued operations	0.15	(0.01)	0.13
Net income (loss)	$ (0.11)	$ (0.46)	$ (0.93)
Weighted average shares outstanding
Basic	25,210	24,277	16,433
Diluted	25,210	24,277	16,433
Durable Medical Equipment | Sales and Services
Revenues:
Revenue from contract with customer	$ 27,298
Operating costs and expenses:
Total operating costs and expenses	11,463
Durable Medical Equipment | Rental
Revenues:
Rental income	14,582
Operating costs and expenses:
Total operating costs and expenses	5,798
Investment Management
Revenues:
Revenue from contract with customer	3,841	$ 4,085	$ 4,927
Operating costs and expenses:
Total operating costs and expenses	4,025	8,206	$ 4,779
Real Estate
Operating costs and expenses:
Total operating costs and expenses	884	375
Real Estate | Rental
Revenues:
Rental income	$ 5,459	$ 1,850

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Stockholders' Equity - Performance Shares (Restricted Stock Awards) - Additional Information (Details) - Restricted Stock - USD ($)	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Stockholders' Equity
Restricted stock awards forfeited	0
Outstanding shares	732,909
Investment management cumulative revenue collection target	$ 40,000,000
Vesting period	5 years
Maximum term of Investment management agreement fees earned	5 years
Awards probable of vesting under performance condition	479,504
Aggregate grant date fair value of restricted stock granted	$ 600,000	$ 300,000	$ 4,500,000
Total intrinsic value	$ 600,000	$ 1,200,000	$ 0

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Lessee Operating Leases - Schedule of Company's Undiscounted Cash Payment Obligations for Operating Lease (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Lessee Disclosure [Abstract]
For the year ending June 30, 2020	$ 2,090
For the year ending June 30, 2021	2,027
For the year ending June 30, 2022	1,772
For the year ending June 30, 2023	1,135
For the year ending June 30, 2024	781
Thereafter	549
Total lease payments	8,354
Imputed interest	(1,821)
Total lease liabilities	$ 6,533

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SCHEDULE III - Real Estate and Accumulated Depreciation (Parenthetical) (Details) - USD ($) $ in Thousands		12 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
Real Estate, Beginning balance		$ 56,025
Acquisitions			$ 56,025
Real Estate, Ending balance		56,025	56,025
Accumulated Depreciation, Beginning balance		384
Depreciation expense		1,230	384
Accumulated Depreciation, Ending balance		1,614	$ 384
Aggregate cost for federal income tax purposes		64,500
Gartner I and Gartner II | Fort Myers, FL
Real Estate, Ending balance	[1],[2]	56,025
Accumulated Depreciation, Ending balance	[1]	$ 1,614
Buildings | Gartner I and Gartner II | Fort Myers, FL
Estimated useful lives		55 years
Site Improvements | Gartner I and Gartner II | Fort Myers, FL
Estimated useful lives		16 years
Tenant Improvements | Gartner I and Gartner II | Fort Myers, FL
Estimated useful lives		12 years

[1] All property was acquired during the year ended June 30, 2018 as part of the real estate transaction described more fully in Note 4 of the Notes to the Consolidated Financial Statements. Reconciliation of total real estate carrying value and accumulated depreciation for the years ended June 30, 2019 and 2018 are as follows: (in thousands) Real Estate Accumulated Depreciation Balance as of June 30, 2017 $- $- Acquisitions 56,025 - Depreciation expense - 384 Balance as of June 30, 2018 56,025 384 Depreciation expense - 1,230 Balance as of June 30, 2019 $56,025 $1,614

[2] The aggregate cost for federal income tax purposes was $64.5 million at June 30, 2019.

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Borrowings - Schedule of Subsidiaries' Other Outstanding Borrowings (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2018
Debt Instrument [Line Items]
Less current portion of other outstanding borrowings	$ (2,159)	$ (1,999)
Other outstanding borrowings, net of current portion	61,635	55,632
Subsidiaries Other Outstanding Borrowings
Debt Instrument [Line Items]
Total principal	64,314	56,984
Unamortized debt premiums	3,205	3,131
Unamortized debt discounts and issuance costs	(2,250)	(2,484)
Total long-term related party notes payable	65,269	57,631
Less current portion of other outstanding borrowings	(3,530)	(1,999)
Other outstanding borrowings, net of current portion	61,739	55,632
DME Revolver | DME, Inc. | Subsidiaries Other Outstanding Borrowings
Debt Instrument [Line Items]
Total principal	7,401
Equipment Financing | DME, Inc. | Subsidiaries Other Outstanding Borrowings
Debt Instrument [Line Items]
Total principal	1,475
Senior Notes | CRIC IT | Subsidiaries Other Outstanding Borrowings
Debt Instrument [Line Items]
Total principal	52,161	54,161
Subordinated Notes
Debt Instrument [Line Items]
Unamortized debt premiums			$ 3,100
Subordinated Notes | CRIC IT | Subsidiaries Other Outstanding Borrowings
Debt Instrument [Line Items]
Total principal	$ 3,277	$ 2,823

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Fair Value Measurements - Additional Information (Details)	12 Months Ended
	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($)	Sep. 07, 2018 USD ($)
Level 3 assets held		$ 0
Level 3 liabilities held	$ 1,135,000	0
Maximum additional consideration payable			$ 2,400,000
Contingent consideration liability	1,135,000
Fair value assets level 1 to level 2 transfers	0	0
Fair value assets level 2 to level 1 transfers	0	0
Fair Value asset transfers into level 3	0	0
Fair Value asset transfers out of level 3	0	0
Fair value liabilities level 1 to level 2 transfers	0	0
Fair value liabilities level 2 to level 1 transfers	0	0
Fair value liability transfers into level 3	0	0
Fair value liability transfers out of level 3	$ 0	$ 0
GECC
Percentage of ownership interest (as a percent)	19.50%
Common stock, shares owned by parent | shares	1,966,667
DME, Inc.
Maximum additional consideration payable	$ 2,100,000		2,400,000
Contingent consideration liability	1,000,000
Payments of contingent consideration	300,000
Contingent consideration fair value	1,100,000		$ 1,000,000
Payout of the contingent consideration	300,000
DME, Inc. | Sales, General and Administrative Expenses
Contingent consideration charge	$ 400,000
Monte Carlo Simulation Model | Weighted Average Cost of Capital
Contingent consideration, fair value estimation	12		14
Monte Carlo Simulation Model | Weighted Average Cost of Capital | DME, Inc.
Contingent consideration, fair value estimation			14
Monte Carlo Simulation Model | Volatility
Contingent consideration, fair value estimation	27.4		33.5
Monte Carlo Simulation Model | Volatility | DME, Inc.
Contingent consideration, fair value estimation			33.5

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Goodwill and Other Intangible Assets - Summary of Amortization Expense of Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Finite Lived Intangible Assets Future Amortization Expense Current And Five Succeeding Fiscal Years [Abstract]
Aggregate Amortization Expense	$ 2,063	$ 730	$ 324
Estimated Future Amortization Expense For the year ending June 30, 2020	2,335
Estimated Future Amortization Expense For the year ending June 30, 2020	2,187
Estimated Future Amortization Expense For the year ending June 30, 2020	2,028
Estimated Future Amortization Expense For the year ending June 30, 2023	1,887
Estimated Future Amortization Expense For the year ending June 30, 2024	$ 1,701

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Stockholders' Equity - Rights Offering - Additional Information (Details) - USD ($)	1 Months Ended	12 Months Ended
	Nov. 30, 2016	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017	Oct. 31, 2016
Stockholders' Equity
Proceeds from rights offering issuance of common stock		$ 1,551,000	$ 4,572,000	$ 45,000,000
Expense of sale of stock				$ 2,353,000
Rights Offering
Stockholders' Equity
Stock rights exercise price	$ 3.285
Common stock, shares issued	12,755,200
Proceeds from rights offering issuance of common stock	$ 41,900,000
Expense of sale of stock	2,400,000
Net proceeds	39,500,000
Rights Offering | Backstop Investment Agreement
Stockholders' Equity
Maximum investment in shares of common stock by investors					$ 36,600,000
Common stock rights offering to existing stockholders	$ 45,000,000
Rights Offering | Backstop Providers
Stockholders' Equity
Common stock, shares issued	945,333
Proceeds from rights offering issuance of common stock	$ 3,100,000

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Discontinued Operations - Reconciliation of Previous Operations as Reclassified for All Periods Presented (Parenthetical) (Details) $ in Millions	12 Months Ended
	Jun. 30, 2018 USD ($)
Divesture
Discontinued Operations [Line Items]
Discontinued operating costs related to representations and warranties of patent licensing	$ 0.2

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Acquisitions - Summary of Fair Values of Assets Acquired and Liabilities Assumed at Date of Acquisition (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Sep. 07, 2018
Business Acquisition [Line Items]
Goodwill	$ 50,397
DME, Inc.
Business Acquisition [Line Items]
Accounts receivable		$ 6,021
Inventories		1,405
Other assets		503
Fixed assets		852
Equipment held for rent		7,947
Goodwill	44,700	44,741
Intangible assets	10,100
Right of use asset		4,205
Current liabilities		(5,955)
Operating lease liabilities		(4,285)
Deferred tax liabilities		(1,160)
Non-controlling interest		(7,265)
Net Assets Acquired		57,069
DME, Inc. | As Previously Reported
Business Acquisition [Line Items]
Accounts receivable		5,363
Inventories		1,546
Other assets		503
Fixed assets		852
Equipment held for rent		8,470
Goodwill		46,222
Right of use asset		4,205
Current liabilities		(6,374)
Operating lease liabilities		(4,285)
Non-controlling interest		(7,265)
Net Assets Acquired		57,587
DME, Inc. | Adjustment
Business Acquisition [Line Items]
Accounts receivable		658
Inventories		(141)
Equipment held for rent		(523)
Goodwill		(1,481)
Current liabilities		419
Deferred tax liabilities		(1,160)
Net Assets Acquired		(518)
DME, Inc. | Trade Name
Business Acquisition [Line Items]
Intangible assets	8,800	8,800
DME, Inc. | Trade Name | As Previously Reported
Business Acquisition [Line Items]
Intangible assets		6,900
DME, Inc. | Trade Name | Adjustment
Business Acquisition [Line Items]
Intangible assets		1,900
DME, Inc. | Non-compete Agreements
Business Acquisition [Line Items]
Intangible assets	1,300	1,260
DME, Inc. | Non-compete Agreements | As Previously Reported
Business Acquisition [Line Items]
Intangible assets		1,450
DME, Inc. | Non-compete Agreements | Adjustment
Business Acquisition [Line Items]
Intangible assets		$ (190)
Midwest Respiratory Care, Inc.
Business Acquisition [Line Items]
Inventories	7
Other assets	1
Fixed assets	52
Equipment held for rent	447
Goodwill	5,656
Intangible assets	180
Right of use asset	238
Operating lease liabilities	(238)
Net Assets Acquired	6,343
Midwest Respiratory Care, Inc. | Non-compete Agreements
Business Acquisition [Line Items]
Intangible assets	$ 200

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Revenue - Summary of Major Source of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended																12 Months Ended
	Jun. 30, 2019	[1]	Mar. 31, 2019	[1]	Dec. 31, 2018	[1]	Sep. 30, 2018	[1]	Jun. 30, 2018	[1]	Mar. 31, 2018	[1]	Dec. 31, 2017	[1]	Sep. 30, 2017	[1]	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Disaggregation Of Revenue [Line Items]
Total product and services revenue																	$ 31,139	$ 4,085	$ 4,927
Total rental revenue																	20,041	1,850
Total revenues	$ 15,082		$ 14,084		$ 15,541		$ 6,473		$ 2,091		$ (448)		$ 2,523		$ 1,769		51,180	5,935	4,927
Investment Management
Disaggregation Of Revenue [Line Items]
Total product and services revenue																	3,841	4,085	4,927
Investment Management | Management Fees
Disaggregation Of Revenue [Line Items]
Total product and services revenue																	2,956	2,604	1,530
Investment Management | Incentive Fees
Disaggregation Of Revenue [Line Items]
Total product and services revenue																		163	2,757
Investment Management | Administration Fees
Disaggregation Of Revenue [Line Items]
Total product and services revenue																	885	1,318	$ 640
Durable Medical Equipment | Equipment Sales
Disaggregation Of Revenue [Line Items]
Total product and services revenue																	22,400
Durable Medical Equipment | Service Revenues
Disaggregation Of Revenue [Line Items]
Total product and services revenue																	4,898
Durable Medical Equipment | Sales and Services
Disaggregation Of Revenue [Line Items]
Total product and services revenue																	27,298
Durable Medical Equipment | Rental
Disaggregation Of Revenue [Line Items]
Total rental revenue																	14,582
Durable Medical Equipment | Medical Equipment
Disaggregation Of Revenue [Line Items]
Total rental revenue																	14,582
Real Estate | Rental
Disaggregation Of Revenue [Line Items]
Total rental revenue																	$ 5,459	$ 1,850

[1] Investment management revenues are net of incentive fee reversals determined based upon a hypothetical liquidation of net assets at March 31, 2018. The incentive fee reversal is related to the conversion of Avanti third lien notes, an investment of GECC, to common equity in March 2018

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Acquisitions (Tables)

12 Months Ended

Jun. 30, 2019

Summary of Acquisition Date Fair Value of Consideration Transferred

The acquisition date fair value of the consideration transferred is summarized in the following table:

(in thousands)	As Previously Reported(1)		Adjustment			As Adjusted
Cash	$	25,321	$	-		$	25,321
Net working capital adjustment		-		(254	)		(254	)
Increase in note payable to seller(2)		16,500		-			16,500
Debt assumed		9,275		-			9,275
Preferred stock in DME Holdings		5,266		-			5,266
Contingent consideration		1,225		(264	)		961
Total Consideration	$	57,587	$	(518	)	$	57,069

(1) As reported in our Form 10-Q for the three months ended September 30, 2018.

(2) Included in related party note payable on the consolidated balance sheet.

Summary of Fair Values of Assets Acquired and Liabilities Assumed at Date of Acquisition

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

(in thousands)	As Previously Reported(1)			Adjustment			As Adjusted
Accounts receivable	$	5,363		$	658		$	6,021
Inventories		1,546			(141	)		1,405
Other assets		503			-			503
Fixed assets		852			-			852
Equipment held for rent		8,470			(523	)		7,947
Goodwill		46,222			(1,481	)		44,741
Tradename		6,900			1,900			8,800
Non-compete agreements		1,450			(190	)		1,260
Right of use asset		4,205			-			4,205
Current liabilities		(6,374	)		419			(5,955	)
Operating lease liabilities		(4,285	)		-			(4,285	)
Deferred tax liabilities		-			(1,160	)		(1,160	)
Non-controlling interest		(7,265	)		-			(7,265	)
Net Assets Acquired	$	57,587		$	(518	)	$	57,069

(1) As reported in our Form 10-Q for the three months ended September 30, 2018.

Pro Forma Results Pursuant to Requirements of ASC Topic 805

The pro forma results presented below were prepared pursuant to the requirements of ASC Topic 805, Business Combinations, and give effect to the acquisition as if it had been consummated on July 1, 2017.  The pro forma results have been prepared for comparative purposes only and do not necessarily represent what revenue or results of operations would have been had the acquisition been completed on July 1, 2017.  In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved by the Company.

	For the years ended June 30,
(in thousands)	2019			2018
Revenues	$	59,529		$	53,107
Net loss		(2,946	)		(11,591	)
Net loss attributable to Great Elm Capital Group		(2,397	)		(11,497	)

Midwest Respiratory Care, Inc.

Summary of Fair Values of Assets Acquired and Liabilities Assumed at Date of Acquisition

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

(in thousands)	Amount
Inventories	$	7
Other assets		1
Fixed assets		52
Equipment held for rent		447
Goodwill		5,656
Non-compete agreements		180
Right of use asset		238
Operating lease liabilities		(238	)
Net Assets Acquired	$	6,343

Pro Forma Results Pursuant to Requirements of ASC Topic 805

The pro forma results presented below were prepared pursuant to the requirements of ASC Topic 805, Business Combinations, and give effect to the acquisition as if it had been consummated on July 1, 2017.  The pro forma results have been prepared for comparative purposes only and do not necessarily represent what revenue or results of operations would have been had the acquisition been completed on July 1, 2017.  In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved by the Company.

	For the years ended June 30,
(in thousands)	2019			2018
Revenues	$	54,520		$	9,275
Net loss		(2,165	)		(10,764	)
Net loss attributable to Great Elm Capital Group		(2,113	)		(10,493	)

CRIC IT Fort Myers LLC

Summary of Fair Values of Assets Acquired and Liabilities Assumed at Date of Acquisition

The following table summarizes the acquisition cost and the allocation to the assets acquired and liabilities assumed based on the relative fair values on the date of acquisition:

(in thousands)	Amount
Cash consideration	$	2,700
Cash and restricted cash acquired		(606	)
Transaction costs		261
Total consideration, net of cash and restricted cash acquired	$	2,355
Buildings	$	43,355
Land and site improvements		9,170
In-place lease intangible asset		6,028
Tenant improvements		3,500
Other assets		253
Senior note payable assumed		(52,227	)
Subordinated note payable assumed		(5,789	)
Deferred tax liability		(478	)
Other liabilities assumed		(786	)
Non-controlling interests		(671	)
Net assets acquired	$	2,355

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Fair Value Measurements (Tables)

12 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Summary of Assets and Liabilities Measured at Fair Value on Recurring and Non-recurring Basis

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

	Fair Value as of June 30, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment in GECC	$	17,110	$	-	$	-	$	17,110
Total assets	$	17,110	$	-	$	-	$	17,110
Liabilities:
Contingent consideration liability	$	-	$	-	$	1,135	$	1,135
Total liabilities	$	-	$	-	$	1,135	$	1,135

Reconciliation of Changes in Contingent Consideration, Level 3 Liability

The following is a reconciliation of changes in contingent consideration, a Level 3 liability, for the year ended June 30, 2019:

(in thousands)
Balance as of June 30, 2018	$	-
Additions		961
Payments		(295	)
Change in fair value		469
Balance as of June 30, 2019	$	1,135

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Lessor Operating Leases

12 Months Ended

Jun. 30, 2019

Lessor Disclosure [Abstract]

Lessor Operating Leases

7. Lessor Operating Leases

Medical Equipment Leases

Through its majority-owned subsidiary DME Inc., and the subsidiaries of DME Inc., the Company owns medical equipment which is leased to customers.  The Company’s customers consist primarily of patients through their clinical providers including medical centers, clinics and hospices and the Company has lease arrangements with these patients.  In addition, the arrangements between the Company and its customers are impacted by arrangements between the Company and Payors.  The Payors may cover a portion or all of the rental payments under the agreements between the Company and its customers.  The patient is responsible for any residual co-payments.

The lease terms may be for a pre-determined time period, generally 10 months to 36 months; however, the customer may cancel the lease at any time and for any reason without penalty and therefore, the Company treats all leases as month-to-month leases.  Upon termination of the lease, the equipment, if not aged beyond its useful life, may be refurbished and subsequently sold or leased to another customer.  As the leases are month-to-month, there are no future lease receivables under the terms of the current leases.

Real Estate Leases

The Company’s majority-owned subsidiary CRIC IT Fort Myers LLC (Property Owner) owns a fee simple interest in two Class A office buildings, Gartner I and Gartner II (collectively, the Property).  The Property is fully leased, on a triple net basis, to Gartner, Inc. (Gartner) until March 31, 2030, which may be extended at the option of Gartner in accordance with the terms of the lease.  The Gartner I lease contains two five-year extensions and the Gartner II lease contains three five-year extensions (collectively, the Leases).  Under the terms of the Leases, the renewal rates are equal to 95% of the then fair market rent, and the tenant does not have a purchase option at the end of the lease term.  The leases require Gartner to make a base monthly lease payment of approximately $0.4 million as calculated on a straight line basis over the remaining expected lease term plus additional rent payments for additional costs.  Additional rental payments are due for Property Owner costs, such as property taxes, management fees, and insurance costs, as incurred.  See Note 3 – Revenue for additional discussion of rental revenues.

The Property is subject to mortgage, security agreement and assignment of leases and rents with the senior and subordinated lenders, which is further described in Note 11 - Borrowings.  The Property Owner has assigned all rights, title and interest in and to the Property and the Leases to the senior and subordinated lenders and all amounts received are paid to a trust which funds the operating costs associated with the Property.  The Company does not have rights to these rent payments while the borrowings remain outstanding.

The Company expects to derive value from the residual value at the end of the existing lease term by further leasing the assets or through a sale transaction.

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

	For the years ended June 30,
(in thousands)	2019		2018
Revenues from base rents	$	4,603	$	1,473
Revenues from additional rental payments		856		377
Total rental revenues	$	5,459	$	1,850

The following table summarizes the base rents for the remaining lease term:

(in thousands)	Base Rent Payments
For the year ending June 30, 2020	$	4,120
For the year ending June 30, 2021		4,213
For the year ending June 30, 2022		4,312
For the year ending June 30, 2023		4,419
For the year ending June 30, 2024		4,529
Thereafter		28,673
Total base rent	$	50,266

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Revenue

12 Months Ended

Jun. 30, 2019

Revenue From Contract With Customer [Abstract]

Revenue

3. Revenue

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

	For the years ended June 30,
(in thousands)	2019		2018		2017
Product and Services Revenue(1)
Investment Management
Management Fees	$	2,956	$	2,604	$	1,530
Incentive Fees		-		163		2,757
Administration Fees		885		1,318		640
		3,841		4,085		4,927
Durable Medical Equipment
Equipment Sales		22,400		-		-
Service Revenues		4,898		-		-
		27,298		-		-
Total product and services revenue	$	31,139	$	4,085	$	4,927
Rental Revenues
Real Estate
Rental Income		5,459		1,850		-
Durable Medical Equipment
Medical Equipment Rental Income		14,582		-		-
Total rental revenue		20,041		1,850		-
Total	$	51,180	$	5,935	$	4,927

(1) Revenue for sales of products or services recognized in the year ended June 30, 2019 was accounted for under Topic 606 and revenue for sales of products or services recognized in the years ended June 30, 2018 and 2017 was accounted for under Topic 605, as discussed in this note and Note 2 – Summary of Significant Accounting Policies.

Revenue Accounting Under Topic 605

Our revenue recognition policy as it relates to investment management revenue transactions was accounted for under Topic 605 prior to July 1, 2018.  The revenue recognition policies under Topic 605 were consistent with the accounting policies under Topic 606 discussed below for management fees and administration fees.  The accounting for incentive fee revenue under Topic 605 is discussed in Note 2 – Summary of Significant Accounting Policies under Recently Adopted Accounting Standards – Revenue Recognition.  As noted therein, for the years ended June 30, 2018 and 2017, the Company applied the hypothetical liquidation of net assets method to calculate performance fees due as of the reporting date.  Under the application of Topic 606, such incentive fees have not been recognizable to date.

Revenue Accounting Under Topic 606

In determining the appropriate amount of revenue to be recognized under 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.

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.  There were no material changes in estimates recorded in the year ended June 30, 2019, relating to prior periods.

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

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 does not have any partially or unfilled performance obligations related to contracts with customers.  As such, the Company has no contract liabilities as of June 30, 2019.

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, 2019, net unbilled sales and service revenue is approximately $0.5 million and is included in accounts receivable.

We had no balances of contract assets or contract liabilities related to equipment sales and services as of June 30, 2018 as these contracts with customers were acquired in September 2018, with our acquisition of the durable medical equipment businesses.

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; as follows:

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.

Incentive Fees

The Company earns incentive fees based on the investment management agreements GECM has with GECC 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.  Incentive fees are recognized 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% to 20.0% 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.

Administration Fees

The Company earns administration fees based on the administration agreement GECM has with GECC whereby GECC reimburses GECM for costs incurred in performing administrative functions for GECC.  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 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.  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.

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, 2019, 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 $0.9 million as of June 30, 2019.

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, 2019, net unbilled rental revenue is approximately $0.2 million and is included in accounts receivable.

We had no balances related to deferred revenue or unbilled revenue related to equipment rentals as of June 30, 2018 as these balances were acquired in September 2018, with our acquisition of the durable medical equipment businesses.

Real Estate Revenue

Rental Revenue

Consistent with the leases of durable medical equipment, the Company recognizes rental revenue on a straight-line basis over the non-cancelable term of the lease.  Under the terms of the lease, the Company may recover from the tenant certain expenses, including: insurance and other operating expenses.  For all expenses that are paid by the Company and reimbursed by the tenant, the recovery of these expenses is recognized in rental income in the accompanying consolidated statements of operations, in the same periods as the expenses are incurred.  These expenses recognized in both revenue and expense may fluctuate from period to period based on actual expense amounts.

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Borrowings

12 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Borrowings

11. Borrowings

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

		As of June 30,
(in thousands)	Subsidiaries	2019			2018
Corbel Facility	DME Inc. and subsidiaries	$	27,584		$	-
GP Corp. Note	GECC GP Corp.		3,148			3,224
Total principal		$	30,732		$	3,224
Unamortized debt issuance cost			(364	)		-
Total long-term related party notes payable			30,368			3,224
Less current portion of related party notes payable			(2,066	)		-
Related party notes payable, net of current portion		$	28,302		$	3,224

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

		As of June 30,
(in thousands)	Subsidiaries	2019			2018
DME Revolver	DME Inc. and subsidiaries	$	7,401		$	-
Equipment Financing	DME Inc. and subsidiaries		1,475			-
Senior Note	CRIC IT		52,161			54,161
Subordinated Note	CRIC IT		3,277			2,823
Total principal		$	64,314		$	56,984
Unamortized debt premiums			3,205			3,131
Unamortized debt discounts and issuance costs			(2,250	)		(2,484	)
Total other outstanding borrowings			65,269			57,631
Less current portion of other outstanding borrowings			(3,530	)		(1,999	)
Other outstanding borrowings, net of current portion		$	61,739		$	55,632

The Company incurred interest expense of $6.3 million, $1.1 million and $6.3 million for the years ended June 30, 2019, 2018 and 2017, respectively.

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

(in thousands)	Principal Due
For the year ending June 30, 2020	$	5,596
For the year ending June 30, 2021		11,276
For the year ending June 30, 2022		4,048
For the year ending June 30, 2023		4,195
For the year ending June 30, 2024		24,246
Thereafter		58,677
Total	$	108,038
Outstanding principal on related party borrowings	$	30,732
Outstanding principal on other borrowings		64,314
Future interest to be paid-in-kind		12,992
Total future required principal payments	$	108,038

Additional details of each borrowing by operating segment are discussed below.

Durable Medical Equipment

In September 2018, in conjunction with the acquisition of 80.1% of Great Elm 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 acquisition described in Note 4 – Acquisitions.  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.

The Company amended and borrowed an additional $3.4 million under the Corbel Facility in June 2019 bringing the outstanding principal balance to $27.6 million as of June 30, 2019.  The Corbel Facility matures on August 31, 2023, accrues interest at a variable rate of three-month LIBOR plus 10% per annum and is secured by the assets of the durable medical equipment business.  At June 30, 2019 the interest rate was 12.32%.  The Corbel Facility requires quarterly interest payments and principal payments of $0.3 million through the maturity date with the final principal balance due at maturity.  In addition, beginning with the quarter ending December 31, 2018, the Company is required to make additional quarterly principal payments based on a percentage of excess cash flows generated by the durable medical equipment business operations.  The Company has the option to prepay the borrowings outstanding in whole or in part subject to certain prepayment penalties ranging from 1% - 5% of the early payment of the principal, based on the time that the loan has been outstanding through the first five years of the loan.

The Corbel Facility is held by a related party, Corbel.  In connection with the issuance of the amended Corbel Facility, the borrowers paid Corbel a one-time structuring fee of $375,000, which is included in debt issuance costs.  See Note 5 – Related Party Transactions and Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

DME Inc. is required to pay to Corbel, as agent of the Corbel Facility, a quarterly monitoring fee of $25,000 while the borrowings remain outstanding.  In addition, if the borrowing is repaid with proceeds of debt in full or in part at any time within the first three years from the date of issuance, the borrower shall pay an additional fee to the agent, ranging from 2.10% to 3.50% depending on the date of repayment based on the period outstanding, of the aggregate repaid principal amount.

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

	For the years ended June 30,
(in thousands)	2019		2018		2017
Principal payments	$	625	$	-	$	-
Interest expense		2,617		-		-

The DME Revolver had a balance of $7.4 million at June 30, 2019 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 August 30, 2020 and accrue interest at a variable rate of the prime rate plus 0.40% per annum.  At June 30, 2019 the interest rate was 5.90%.  Interest is payable monthly in arrears.  The Company has the option to prepay the borrowings without any penalty.  If the DME Revolver is terminated within the first year, a termination fee equal to 3% of the original credit limit will be due.  The Company has classified all borrowings under the DME Revolver as long term in the consolidated balance sheets 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 the Company is required to meet certain financial covenants.

The Corbel Facility and DME Revolver each include 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.  Events of default include the failure to pay amounts when due, bankruptcy, or violation of covenants, including a change in control of DME Inc.  DME Inc. must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the DME Inc. EBITDA levels.

As of June 30, 2019, the fair value approximates the carrying value for both the Corbel Facility and the DME Revolver.

Beginning in April 2019, DME Inc’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%.  During the year ended June 30, 2019, the Company financed $1.6 million in inventory and equipment through such financing agreements.

Investment Management

The GP Corp. 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 June 30, 2019 the interest rate was 5.32%.  The GP Corp. Note requires quarterly interest only payments and annual principal payments of $0.08 million, based on the Company’s fiscal year ending June 30.

The GP Corp. Note is non-recourse to any of the Company’s operations or net assets not related to GECM’s management services to GECC.  The GP Corp. Note may be prepaid at par value at any time with prior written notice to the holders of the GP Corp. Note.  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.

The GP Corp. Note is held by MAST Capital, a related party.  Payments and interest expense incurred on the GP Corp. Note are summarized in the following table:

	For the years ended June 30,
(in thousands)	2019		2018		2017
Principal payments	$	76	$	712	$	36,838
Interest expense		181		217		285

The Company estimated the fair value of the GP Corp. Note as of June 30, 2019 and June 30, 2018, on a non-recurring basis, using Level 3 inputs.  As of June 30, 2019 and June 30, 2018, the carrying value of the note approximated the fair value.

Real Estate

In March 2018, in connection with the acquisition of the real estate business, the Company assumed a senior secured note (Senior Note) with a principal balance of $54.8 million and a subordinated note (Subordinated Note) with a principal balance of $2.7 million at the date of acquisition.  The Senior Note was recorded at an estimated fair value of $52.2 million, reflecting a discount of $2.6 million from the face amount; and the Subordinated Note was recorded at $5.8 million, reflecting a premium of $3.1 million.  The discount and premium amortize over the life of the notes.

The Senior Note matures on March 15, 2030, accrues interest at a rate of 3.49% per annum and is secured by a first lien mortgage on the Property and an Assignment of Leases and Rents.  The Senior Note requires monthly principal and interest payments through the maturity date, with the last payment of $18.4 million on March 15, 2030.  The principal and interest due on the Senior Note may be prepaid at the option of the borrower, based on an amount determined by discounting the remaining principal and interest payments at a rate equal to an applicable premium in excess of a rate corresponding to the specified U.S. Treasury security over the remaining average life of the Senior Note.

The Subordinated Note matures on March 15, 2030, accrues interest at a rate of 15.0% per annum, and is secured by a second lien mortgage on the Property and an Assignment of Leases and Rents.  The Subordinated Note is a capital appreciation note, whereby the monthly interest is capitalized to the principal balance and due at maturity.  Accordingly, a $16.3 million payment is due on March 15, 2030.  The principal and interest due on the Subordinate Note may be prepaid at the option of the borrower, based on an amount determined by discounting the remaining principal and interest payments at a rate equal to an applicable premium in excess of a rate corresponding to the specified U.S. Treasury security over the remaining average life of the Subordinated Note.

The note agreements include negative covenants that restrict the Property Owner’s business operations to ownership and lease of the Property, limit additional indebtedness, require maintenance of insurance and other customary requirements related to the Property.  Events of default include non-payment of amounts when due, inability to pay indebtedness or material change in the business operations or financial condition of the Property Owner or the lease tenant that in the Lender’s reasonable determination would reasonably be expected to materially impair the value of the Property, prevent timely repayment of the notes or performance of any material obligations under the note and related agreements.  The payments under the notes are also guaranteed on a full and several basis by the non-controlling interest holder of the Property Owner.  Both the Senior Note and Subordinated Note are non-recourse to the Company, but are secured by the Property, the rights associated with the Leases and the stock owned by the Company in the Property Owner.  See Note 7 – Lessor Operating Leases.

As of June 30, 2019 and June 30, 2018, the fair value approximates the carrying value for both the Senior Note and Subordinated Note.

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Borrowings - Additional Information (Details) - USD ($)		12 Months Ended
	Apr. 02, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017	Sep. 30, 2018	Sep. 07, 2018	Mar. 31, 2018
Debt Instrument [Line Items]
Interest expense		$ 6,250,000	$ 1,071,000	$ 6,321,000
Equipment Financing Debt Agreements | Operating Subsidiaries of DME Inc
Debt Instrument [Line Items]
Inventory and equipment financing		$ 1,600,000
Minimum | Equipment Financing Debt Agreements | Operating Subsidiaries of DME Inc
Debt Instrument [Line Items]
Term of debt	1 year
Implicit interest rate	7.00%
Maximum | Equipment Financing Debt Agreements | Operating Subsidiaries of DME Inc
Debt Instrument [Line Items]
Term of debt	3 years
Implicit interest rate	8.00%
DME Revolver
Debt Instrument [Line Items]
Debt instrument variable rate		0.40%
Debt instrument description		the prime rate plus 0.40% per annum
Credit facility balance		$ 7,400,000
Credit facility maximum borrowing capacity		$ 10,000,000
Credit facility expiration date		Aug. 30, 2020
Credit facility interest rate		5.90%
Percentage of termination fee payable on original credit limit upon termination within first year		3.00%
Great Elm DME, Inc.
Debt Instrument [Line Items]
Percentage of voting interests acquired						80.10%
Great Elm DME, Inc. | DME Revolver
Debt Instrument [Line Items]
Debt acquired principal amount					$ 6,300,000	$ 800,000
Corbel Facility
Debt Instrument [Line Items]
Additional borrowings		$ 3,400,000
Outstanding principal		$ 27,600,000
Secured notes, maturity date		Aug. 31, 2023
Debt instrument variable rate		10.00%
Debt instrument description		three-month LIBOR plus 10% per annum
Debt instrument interest rate		12.32%
Debt instrument last required payment		$ 300,000
Debt Instrument prepayment period		5 years
Debt instrument structuring fee		$ 375,000
Debt instrument monitoring fee per quarterly		$ 25,000
Debt instrument early repayment period		3 years
Corbel Facility | Minimum
Debt Instrument [Line Items]
Debt instrument prepayment penalties		1.00%
Debt instrument additional fee percentage		2.10%
Corbel Facility | Maximum
Debt Instrument [Line Items]
Debt instrument prepayment penalties		5.00%
Debt instrument additional fee percentage		3.50%
Corbel Facility | Great Elm DME, Inc.
Debt Instrument [Line Items]
Debt acquired principal amount					$ 25,000,000	$ 8,500,000
GP Corp. Note
Debt Instrument [Line Items]
Secured notes, maturity date		Nov. 30, 2026
Debt instrument variable rate		3.00%
Debt instrument description		three-month LIBOR plus 3.0% per annum
Debt instrument interest rate		5.32%
Mandatory annual payments on debt		$ 80,000
Senior Notes
Debt Instrument [Line Items]
Debt acquired principal amount							$ 54,800,000
Secured notes, maturity date		Mar. 15, 2030
Debt instrument interest rate		3.49%
Debt instrument last required payment		$ 18,400,000
Senior and subordinated notes payable							52,200,000
Debt instrument unamortized discount							2,600,000
Debt instrument last installment payment date		Mar. 15, 2030
Subordinated Notes
Debt Instrument [Line Items]
Debt acquired principal amount							2,700,000
Secured notes, maturity date		Mar. 15, 2030
Debt instrument interest rate		15.00%
Debt instrument last required payment		$ 16,300,000
Senior and subordinated notes payable							5,800,000
Debt instrument unamortized premium							$ 3,100,000
Debt instrument last installment payment date		Mar. 15, 2030

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Goodwill and Other Intangible Assets - Additional Information (Details) - USD ($)	12 Months Ended
	Jun. 30, 2019	Sep. 07, 2018	Jun. 30, 2018
Finite Lived Intangible Assets [Line Items]
Goodwill acquired	$ 50,397,000
Goodwill	50,397,000
DME, Inc.
Finite Lived Intangible Assets [Line Items]
Goodwill acquired	50,400,000
Goodwill	$ 44,700,000	$ 44,741,000
DME Inc and Subsequent Acquisition of Midwest
Finite Lived Intangible Assets [Line Items]
Goodwill			$ 0

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Lessee Operating Leases - Schedule of Additional Details of Leases Presented in Balance Sheets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Operating Leased Assets [Line Items]
Right of use assets	$ 6,239	$ 1,521
Current portion of lease liabilities	1,423	336
Lease liabilities, net of current portion	5,110	1,304
Total liabilities	6,533
Facilities
Operating Leased Assets [Line Items]
Right of use assets	6,066	1,521
Current portion of lease liabilities	1,371	336
Lease liabilities, net of current portion	4,989	1,304
Total liabilities	$ 6,360	$ 1,640
Weighted-average remaining life	4 years 4 months 24 days	6 years 3 months 18 days
Weighted-average discount rate	11.70%	10.00%
Vehicles
Operating Leased Assets [Line Items]
Right of use assets	$ 80
Current portion of lease liabilities	18
Lease liabilities, net of current portion	62
Total liabilities	$ 80
Weighted-average remaining life	3 years 8 months 12 days
Weighted-average discount rate	12.30%
Equipment
Operating Leased Assets [Line Items]
Right of use assets	$ 93
Current portion of lease liabilities	34
Lease liabilities, net of current portion	59
Total liabilities	$ 93
Weighted-average remaining life	2 years 7 months 6 days
Weighted-average discount rate	12.50%

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Quarterly Financial Results (Unaudited) - Summary of Quarterly Financial Results (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended																12 Months Ended
	Jun. 30, 2019		Mar. 31, 2019		Dec. 31, 2018		Sep. 30, 2018		Jun. 30, 2018		Mar. 31, 2018		Dec. 31, 2017		Sep. 30, 2017		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Quarterly Financial Information Disclosure [Abstract]
Revenue	$ 15,082	[1]	$ 14,084	[1]	$ 15,541	[1]	$ 6,473	[1]	$ 2,091	[1]	$ (448)	[1]	$ 2,523	[1]	$ 1,769	[1]	$ 51,180	$ 5,935	$ 4,927
Operating costs and expenses	16,659		14,601		15,308		8,916		4,652		3,088		3,527		5,137		55,484	16,404	9,532
Operating loss	(1,577)		(517)		233		(2,443)		(2,561)		(3,536)		(1,004)		(3,368)		(4,304)	(10,469)	(4,605)
Loss from continuing operations	(998)		322		(4,251)		(1,941)		(2,521)		(4,234)		(1,202)		(3,384)		(6,868)	(11,341)	(17,440)
Income (loss) from discontinued operations	(50)		3,879		(25)		(68)		(10)		(155)						3,736	(165)	2,203
Net income (loss) attributable to Great Elm Capital Group, Inc.	$ (794)		$ 4,236		$ (4,346)		$ (2,004)		$ (2,507)		$ (4,361)		$ (1,169)		$ (3,030)		$ (2,908)	$ (11,067)	$ (15,207)
Basic income (loss) from continuing operations per share	$ (0.03)		$ 0.02		$ (0.17)		$ (0.08)		$ (0.10)		$ (0.17)		$ (0.05)		$ (0.13)		$ (0.26)	$ (0.45)	$ (1.06)
Basic income (loss) from discontinued operations per share	0.00		0.15		0.00		0.00		0.00		(0.01)						0.15	(0.01)	0.13
Net income (loss)	(0.03)		0.17		(0.17)		(0.08)		(0.10)		(0.18)		(0.05)		(0.13)		(0.11)	(0.46)	(0.93)
Diluted income (loss) from continuing operations per share	(0.03)		0.02		(0.17)		(0.08)		(0.10)		(0.17)		(0.05)		(0.13)		(0.26)	(0.45)	(1.06)
Diluted income (loss) from discontinued operations per share	0.00		0.15		0.00		0.00		0.00		(0.01)						0.15	(0.01)	0.13
Net income (loss)	$ (0.03)		$ 0.17		$ (0.17)		$ (0.08)		$ (0.10)		$ (0.18)		$ (0.05)		$ (0.13)		$ (0.11)	$ (0.46)	$ (0.93)
Shares used in computing:
Basic income (loss) per share	25,335		25,265		25,187		25,054		24,712		24,612		24,562		23,233		25,210	24,277	16,433
Diluted income (loss) per share	25,335		25,277		25,187		25,054		24,712		24,612		24,562		23,233		25,210	24,277	16,433

[1] Investment management revenues are net of incentive fee reversals determined based upon a hypothetical liquidation of net assets at March 31, 2018. The incentive fee reversal is related to the conversion of Avanti third lien notes, an investment of GECC, to common equity in March 2018

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Stockholders' Equity - Tax Benefits Preservation Agreement - Additional Information (Details) - $ / shares	Jan. 28, 2018	Jun. 30, 2019	Jun. 30, 2018
Stockholders' Equity
Rights plan restriction, maximum percentage of common stock a person or an entity can acquire		4.99%
Rights plan restriction, maximum percentage of common stock owned by a person or an entity restricted from buying additional shares		5.00%
Common stock, par value		$ 0.001	$ 0.001
Preferred stock, par value		$ 0.001	$ 0.001
Preferred Stock Purchase Right
Stockholders' Equity
Number of rights distributed per common share	1
Common stock, par value	$ 0.001
Number of rights automatically attaching per common share	1
Number of shares of Series A Junior Participating Cumulative Preferred Stock purchased by each right	0.0001
Preferred stock, par value	$ 0.001
Preferred stock rights exercise price	$ 15.00

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Stockholders' Equity - Activity of Restricted Stock Award (Details) - Restricted Stock shares in Thousands	12 Months Ended
	Jun. 30, 2019 $ / shares shares
Restricted Stock
Beginning Balance | shares	767
Granted | shares	186
Vested | shares	(171)
Ending Balance | shares	782
Weighted average grant date fair value
Beginning Balance | $ / shares	$ 3.92
Granted | $ / shares	3.43
Vested | $ / shares	3.53
Ending Balance | $ / shares	$ 3.89

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Borrowings - Schedule of Related Party Borrowings of Subsidiaries (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Debt Instrument [Line Items]
Less current portion of related party notes payable	$ (2,159)	$ (1,999)
Related party notes payable, net of current portion	61,635	55,632
Related Party Borrowings Subsidiaries
Debt Instrument [Line Items]
Total principal	30,732	3,224
Unamortized debt issuance cost	(364)
Total long-term related party notes payable	30,368	3,224
Less current portion of related party notes payable	(2,066)
Related party notes payable, net of current portion	28,302	3,224
Corbel Facility
Debt Instrument [Line Items]
Total principal	27,600
Corbel Facility | DME, Inc. | Related Party Borrowings Subsidiaries
Debt Instrument [Line Items]
Total principal	27,584
GP Corp. Note | GECC GP Corp. | Related Party Borrowings Subsidiaries
Debt Instrument [Line Items]
Total principal	$ 3,148	$ 3,224

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Acquisitions - Summary of Acquisition Date Fair Value of Consideration Transferred (Details) - DME, Inc. $ in Thousands	Sep. 07, 2018 USD ($)
Business Acquisition [Line Items]
Cash	$ 25,321
Net working capital adjustment	(254)
Increase in note payable to seller	16,500
Debt assumed	9,275
Contingent consideration	961
Total Consideration	57,069
Preferred Stock | DME Holdings
Business Acquisition [Line Items]
Preferred stock in DME Holdings	5,266
As Previously Reported
Business Acquisition [Line Items]
Cash	25,321
Increase in note payable to seller	16,500
Debt assumed	9,275
Contingent consideration	1,225
Total Consideration	57,587
As Previously Reported | Preferred Stock | DME Holdings
Business Acquisition [Line Items]
Preferred stock in DME Holdings	5,266
Adjustment
Business Acquisition [Line Items]
Net working capital adjustment	(254)
Contingent consideration	(264)
Total Consideration	$ (518)

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Summary of Significant Accounting Policies - Effect of Change in Accounting On Condensed Consolidated Statement of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended																12 Months Ended
	Jun. 30, 2019		Mar. 31, 2019		Dec. 31, 2018		Sep. 30, 2018		Jun. 30, 2018		Mar. 31, 2018		Dec. 31, 2017		Sep. 30, 2017		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Total revenues accounted for under Topic 606																	$ 31,139	$ 4,085	$ 4,927
Total revenues	$ 15,082	[1]	$ 14,084	[1]	$ 15,541	[1]	$ 6,473	[1]	$ 2,091	[1]	$ (448)	[1]	$ 2,523	[1]	$ 1,769	[1]	51,180	5,935	4,927
Net income (loss) from continuing operations	(998)		322		(4,251)		(1,941)		(2,521)		(4,234)		(1,202)		(3,384)		(6,868)	(11,341)	(17,440)
Net income (loss)																	(3,132)	(11,506)	(15,237)
Net income (loss) attributable to Great Elm Capital Group	$ (794)		$ 4,236		$ (4,346)		$ (2,004)		$ (2,507)		$ (4,361)		$ (1,169)		$ (3,030)		$ (2,908)	$ (11,067)	$ (15,207)
Basic and diluted net income (loss) per share																	$ (0.11)	$ (0.46)	$ (0.93)
Investment Management
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Total revenues accounted for under Topic 606																	$ 3,841	$ 4,085	$ 4,927
Durable Medical Equipment | Sales and Services
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Total revenues accounted for under Topic 606																	27,298
Topic 606 | Under Topic 605
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Total revenues accounted for under Topic 606																	34,273
Total revenues																	54,314
Net income (loss) from continuing operations																	(3,734)
Net income (loss)																	2
Net income (loss) attributable to Great Elm Capital Group																	$ 226
Basic and diluted net income (loss) per share																	$ 0.01
Topic 606 | Effect of Change
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Total revenues accounted for under Topic 606																	$ 3,134
Total revenues																	3,134
Net income (loss) from continuing operations																	3,134
Net income (loss)																	3,134
Net income (loss) attributable to Great Elm Capital Group																	$ 3,134
Basic and diluted net income (loss) per share																	$ 0.12
Topic 606 | Investment Management | Under Topic 605
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Total revenues accounted for under Topic 606																	$ 6,975
Topic 606 | Investment Management | Effect of Change
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Total revenues accounted for under Topic 606																	3,134
Topic 606 | Durable Medical Equipment | Sales and Services | Under Topic 605
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Total revenues accounted for under Topic 606																	$ 27,298

[1] Investment management revenues are net of incentive fee reversals determined based upon a hypothetical liquidation of net assets at March 31, 2018. The incentive fee reversal is related to the conversion of Avanti third lien notes, an investment of GECC, to common equity in March 2018

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Related Party Transactions (Tables)

12 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Schedule of Activity and Outstanding Balances Between GECC and Company

The following tables summarize activity and outstanding balances between GECC and the Company.

	For the years ended June 30,
(in thousands)	2019			2018			2017
Change in unrealized gain (loss) on investment in GECC    recorded in the period	$	(1,062	)	$	(2,714	)	$	(9,114	)
GECC dividends recorded in the period		2,431			2,352			1,306

	As of As of June 30,
(in thousands)	2019		2018
Dividends receivable from GECC	$	206	$	163
Investment management revenues receivable from GECC(1)		1,124		4,094

(1) Investment management fees receivable from GECC as of June 30, 2018 include incentive fee receivables of $2.9 million which have been reversed as a result of the adoption of Topic 606 on July 1, 2018.  See Note 2 – Summary of Significant Accounting Policies.

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Changes in Carrying Value of Goodwill

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

(in thousands)
Balance, June 30, 2018	$	-
Acquisitions		50,397
Balance, June 30, 2019		50,397

Summary of Acquired Identifiable Intangible Assets

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

	As of June 30, 2019							As of June 30, 2018
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Durable Medical Equipment
Tradename	$	8,800	$	(733	)	$	8,067	$	-	$	-		$	-
Non-compete agreements		1,440		(210	)		1,230		-		-			-
		10,240		(943	)		9,297		-		-			-
Investment Management
Investment management agreement		3,900		(1,336	)		2,564		3,900		(789	)		3,111
Assembled workforce		526		(180	)		346		526		(106	)		420
		4,426		(1,516	)		2,910		4,426		(895	)		3,531
Real Estate
In-place lease		6,028		(659	)		5,369		6,028		(159	)		5,869
Total	$	20,694	$	(3,118	)	$	17,576	$	10,454	$	(1,054	)	$	9,400

Summary of Amortization Expense of Identifiable Intangible Assets

Aggregate Amortization Expense (in thousands):
For the year ended June 30, 2019	$	2,063
For the year ended June 30, 2018		730
For the year ended June 30, 2017		324

Estimated Future Amortization Expense (in thousands):
For the year ending June 30, 2020	$	2,335
For the year ending June 30, 2021		2,187
For the year ending June 30, 2022		2,028
For the year ending June 30, 2023		1,887
For the year ending June 30, 2024		1,701

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Lessee Operating Leases

12 Months Ended

Jun. 30, 2019

Lessor Disclosure [Abstract]

Lessee Operating Leases

10. Lessee Operating Leases

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, 2019			June 30, 2018
Facilities
Right of use assets	$	6,066		$	1,521
Current portion of lease liabilities		1,371			336
Lease liabilities, net of current portion		4,989			1,304
Total liabilities	$	6,360		$	1,640
Weighted-average remaining life	4.4 years			6.3 years
Weighted-average discount rate		11.7	%		10.0	%
Vehicles
Right of use assets	$	80		$	-
Current portion of lease liabilities		18			-
Lease liabilities, net of current portion		62			-
Total liabilities	$	80		$	-
Weighted-average remaining life	3.7 years			n/a
Weighted-average discount rate		12.3	%	n/a
Equipment
Right of use assets	$	93		$	-
Current portion of lease liabilities		34			-
Lease liabilities, net of current portion		59			-
Total liabilities	$	93		$	-
Weighted-average remaining life	2.6 years			n/a
Weighted-average discount rate		12.5	%	n/a

As of June 30, 2019, the Company had total right of use assets of $6.2 million and lease liabilities of $6.5 million (consisting of $1.4 million in current portion of lease liabilities and $5.1 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.

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)	2019		2018		2017
Facilities
Operating lease cost	$	1,777	$	353	$	723
Cash paid for operating leases		1,720		920		786
Vehicles
Operating lease cost	$	23	$	-	$	-
Cash paid for operating leases		23		-		-
Equipment
Operating lease cost	$	31	$	-	$	-
Cash paid for operating leases		31		-		-

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

(in thousands)
For the year ending June 30, 2020	$	2,090
For the year ending June 30, 2021		2,027
For the year ending June 30, 2022		1,772
For the year ending June 30, 2023		1,135
For the year ending June 30, 2024		781
Thereafter		549
Total lease payments	$	8,354
Imputed interest		(1,821	)
Total lease liabilities	$	6,533

Durable Medical Equipment

As part of the durable medical equipment acquisitions discussed in Note 4 – Acquisitions, the Company assumed leases for facilities, vehicles and equipment.  Subsequent to the acquisitions, the Company has entered into additional similar facilities leases.

The facility leases include offices, retail and warehouse space and sleep labs.  The facility leases have original or amended terms ranging from 60 to 183 months, some of which include an additional option to extend the lease for up to 180 months.  At the date of acquisition, the remaining lease terms for acquired leases ranged from 3 to 96 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.

Investment Management and General Corporate

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% from $28 to $32 thousand per month.

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Fixed Assets

12 Months Ended

Jun. 30, 2019

Property Plant And Equipment [Abstract]

Fixed Assets

6. Fixed Assets

The Company’s fixed assets consist of its leased real estate assets, 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, 2019			June 30, 2018
Real Estate Assets
Buildings	$	43,355		$	43,355
Land and site improvements		9,170			9,170
Tenant improvements		3,500			3,500
		56,025			56,025
Accumulated depreciation		(1,614	)		(384	)
Net carrying amount	$	54,411		$	55,641
Property and Equipment
Leasehold improvements	$	774		$	45
Vehicles		239			-
Computer equipment and software		187			-
Furniture and fixtures		331			27
Sleep study equipment		232			-
		1,763			72
Accumulated depreciation		(396	)		(31	)
Net carrying amount	$	1,367		$	41
Medical Equipment Held for Rental
Medical equipment held for rental	$	13,294		$	-
Accumulated depreciation		(4,154	)		-
Net carrying amount	$	9,140		$	-

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)	2019		2018		2017
Depreciation and amortization	$	1,619	$	1,124	$	340
Cost of durable medical equipment rentals		5,550		-		-
Total depreciation expense	$	7,169	$	1,124	$	340

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Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. 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, recognition of rental income, estimates for contractual allowances, estimates for allowance for doubtful accounts, 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.

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 13 – 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 and consolidated statements of comprehensive income (loss).

Segments

The Company has four reporting segments: durable medical equipment, investment management, real estate, and general corporate.  The Company regularly reviews each segment for purposes of allocating resources and assessing performance.

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.

The Company’s restricted cash consists of rental income received in advance and a portion of prior period rental income that is reserved for capital and certain operating expenses in connection with the Company’s real estate assets.

Accounts Receivable

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 revenue reserves related to constraints on variable consideration were $3.4 million as of June 30, 2019.  During the year ended June 30, 2019, the Company recognized a reduction to revenue of $1.7 million related to such constraints.  See Note 3 – Revenue.

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, 2019 relating to prior periods.  Changes in variable consideration are recorded as a component of net revenues.

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 the allowance for doubtful accounts is immaterial.

As of June 30, 2019, the Company had unbilled receivables of approximately $0.7 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 billable and are therefore contract assets.  Such contract assets are included in accounts receivable in the consolidated balance sheets.

Investments and Restricted Investments

Investments and restricted investments consist of shares in Great Elm Capital Corp. (GECC), which is carried at fair value.  Restricted investments would represent a portion of the Company’s investment in GECC, which has been contributed as part of a required capitalization for an outstanding obligation.  As of June 30, 2019, there were no outstanding obligations which would require the restriction of any investment.  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

Fair Value Measurements

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

Property, Equipment, Real Estate Assets 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.

Within the durable medical equipment businesses, the Company capitalizes the cost of equipment predominantly leased out to patient customers as such assets are acquired 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 as such assets are acquired 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
Real Estate Assets
Buildings	55
Site improvements	16
Tenant improvements	12
Property and Equipment
Leasehold improvements	lesser of 7 years or life of the lease
Vehicles	5
Sleep study equipment	5
Furniture and fixtures	1 to 5
Computer equipment and software	3
Rental Equipment
Medical equipment for lease	1 to 5

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 our estimates of forecasted net sales.  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 no significant write-offs during the year ended June 30, 2019.

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. 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.

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.

Long-lived Assets

Long-lived assets include real estate assets, 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.  No such impairment triggering events were identified in the periods presented.

Leases and Right of Use Assets

We determine if an arrangement is a lease at inception.  As of June 30, 2019, all of our leases are operating leases.  Operating leases are included in right of use assets (ROU), 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 commencement date in determining the present value of lease payments.  We use the implicit rate when readily determinable.  The ROU assets also includes 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, which are accounted for together as a single lease component.

At June 30, 2019, the majority of our lease liabilities and ROU assets were acquired with the durable medical equipment businesses as discussed in Note 4 – Acquisitions and the amounts disclosed on the consolidated balance sheet represent preliminary valuations.

Cost of Durable Medical Equipment Sold and Services

Cost of durable medical equipment sold and services includes 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 has a three year 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.

Real Estate Expenses

The Company classifies all direct expenses of its real estate segment including: insurance, property management fees and other operating expenses in real estate expense in the accompanying consolidated statements of operations.  Under the terms of the lease, the Company may recover from the tenant certain expenses including: insurance and other operating expenses; the recovery of these expenses is recognized in rental income in the accompanying consolidated statements of operations, in the same periods as the expenses are incurred.

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, which is based on its estimate of useful lives of the assets.

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.

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.

Business Combinations 

Business combinations are accounted for at fair value. 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 (in thousands except per share amounts):

	For the years ended June 30,
	2019			2018			2017
Loss from continuing operations	$	(6,868	)	$	(11,341	)	$	(17,440	)
Income (loss) from discontinued operations, net of tax		3,736			(165	)		2,203
Net income (loss)	$	(3,132	)	$	(11,506	)	$	(15,237	)
Less: net loss attributable to non-controlling interest		(224	)		(439	)		(30	)
Net income (loss) attributable to Great Elm Capital Group	$	(2,908	)	$	(11,067	)	$	(15,207	)
Weighted average shares basic and diluted:
Weighted average shares of common stock outstanding		25,210			24,277			16,433
Weighted average shares used in computing income (loss) per share		25,210			24,277			16,433
Basic and diluted income (loss) per share from:
Income (loss) from continuing operations	$	(0.26	)	$	(0.45	)	$	(1.06	)
Income (loss) from discontinued operations		0.15			(0.01	)		0.13
Net income (loss)	$	(0.11	)	$	(0.46	)	$	(0.93	)

As of June 30, 2019, 2018 and 2017, the Company had 3,438,353, 3,443,979, and1,923,279 potential shares of Company common stock, respectively, that are not included in the diluted net income (loss) per share calculation because to do so would be antidilutive.

As of June 30, 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.  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

In the GP Corp. Note Agreement, GECC GP Corp. agreed not to declare any dividends until the GP Corp. Note is satisfied.  In the Senior Note and Subordinated Note, 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 Corbel Facility and DME Revolver.

Concentration of Risk

The Company’s net investment revenue and receivables from continuing operations are attributable to the management of one investment vehicle, GECC.  GECC is a related party based on the Company owning approximately 19.5% of its outstanding common stock as of June 30, 2019.  See Note 5 – Related Party Transactions.

The Company’s real estate rental revenue from continuing operations is derived from one tenant.

The Company’s durable medical equipment revenue and related accounts receivable are concentrated with third-party Payors.  For the year ended June 30, 2019, two government program payor constituted approximately 28% and 11%, respectively, of consolidated revenues.  As of June 30, 2019, receivables from those government program payors constituted 20% and 16%, respectively, of our ending accounts receivable.  An additional third-party payor constituted another 12% of accounts receivables as of June 30, 2019.

A portion of the Company’s outstanding debt, the GP Corp. Note, is held by MAST Capital Management LLC (MAST Capital).  Funds affiliated with MAST Capital reported ownership of approximately 7.9% of the outstanding shares of the Company as of June 30, 2019.

Recently Adopted Accounting Standards

Revenue RecognitionIn May 2014, the Financial Accounting Standards Board (FASB) issued the New Revenue Standard, which replaced Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605), including industry-specific requirements, and provided companies with a single principles-based revenue recognition model for recognizing revenue from contracts with customers.  The core principle of the New Revenue Standard is that a company should recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

On July 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), (Topic 606) and related amendments, under the modified retrospective transition method.  Accordingly, the periods prior to adoption are presented under our prior accounting policies and we applied the new guidance to all open contracts with customers as of the implementation date.

The new guidance outlines a single revenue recognition model for all contracts with customers and provides a framework for addressing revenue recognition issues on a comprehensive basis.  The framework includes five steps:

1. Identifying the contract(s) with a customer.

2. Identifying the performance obligations in the contract.

3. Determining the transaction price.

4. Allocate the transaction price to the performance obligations in the contract.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The adoption of Topic 606 impacted the Company’s revenue recognition policy for incentive fee revenue associated with our investment management agreements.  The Company’s revenue recognition policy for rental revenue for its real estate segment did not change since the revenue recognition for such arrangements is outside the scope of Topic 606.

Under Topic 606, variable consideration such as incentive fees must be constrained (not recognized) if it is not probable that there would not be a significant reversal of recognized revenue.  There was no impact on the Company’s revenue recognition policy for management and administrative revenues as these amounts are not subject to constraint.  The Company fully constrained its performance-based incentive fee revenue in contrast to recognizing revenue based on a hypothetical liquidation of net assets on the reporting date and the distribution of the net proceeds in accordance with the respective investment management agreements under its prior policies.  Under the modified retrospective method, the cumulative effect of adopting Topic 606 was recognized as an adjustment to eliminate incentive fees receivable and increase accumulated deficit of $2.9 million and after such adjustment there were no incentive fees receivable.

The following table reflects the impact of the cumulative effect of the accounting changes upon the adoption of Topic 606 on the consolidated balance sheet as of the beginning of the period:

(in thousands)	As of June 30, 2018			Impact of accounting change			As of July 1, 2018
Incentive fees receivable - related party	$	2,919		$	(2,919	)	$	-
Accumulated deficit		(3,238,547	)		(2,919	)		(3,241,466	)

The following table shows the effect of the change in accounting on the consolidated statement of operations:

	For the year ended June 30, 2019
(in thousands)	Under Topic 605			Under Topic 606			Effect of Change
Investment management revenues	$	6,975		$	3,841		$	3,134
Durable medical equipment sales and services revenue		27,298			27,298			-
Total revenues accounted for under Topic 606	$	34,273		$	31,139		$	3,134
Total revenues		54,314			51,180			3,134
Net income (loss) from continuing operations		(3,734	)		(6,868	)		3,134
Net income (loss)		2			(3,132	)		3,134
Net income (loss) attributable to Great Elm Capital Group		226			(2,908	)		3,134
Basic and diluted net income (loss) per share	$	0.01		$	(0.11	)	$	0.12

Fair Value Measurements In August 2018, the FASB issued 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.  ASU 2018-13 is effective for interim and annual periods beginning after December 15, 2019, with an option to early adopt any eliminated or modified disclosures, and to delay adoption of the additional disclosures, until the effective date.  The Company early adopted the eliminated and modified disclosures of ASU 2018-13 during the three months ended September 30, 2018 and, as a result, updated its financial statement disclosures accordingly. A modified narrative description of measurement uncertainty for level 3 fair value measurements was applied prospectively, with all other amendments applied retrospectively.

Lessor Lease Accounting In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors (ASU 2018-20).  The new guidance permits lessors, as an accounting policy election, to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs, and instead, account for those costs as lessee costs.  Additionally, the guidance updates revenue recognition related to variable payments by (1) requiring lessors to exclude from variable payments lessor costs paid directly to third parties by lessees; and (2) requiring lessors to allocate certain variable payments to lease and nonlease components when there are changes in facts and circumstances on which the variable payment is based.  When an allocation of variable payments between lease and nonlease components is made, the variable payment allocated to the lease component will be recognized as revenue in accordance with Topic 842, whereas the variable payment allocated to the nonlease component will be recognized in accordance with other applicable topics, such as Topic 606.  On January 1, 2019, the Company adopted ASU 2018-20 on a prospective basis and did not make the accounting policy election to account for certain taxes as lessee costs.  Sales and use taxes incurred and reimbursed by lessees related to our Real Estate business are recorded gross within real estate rental income and real estate expenses.  In addition, the adoption resulted in a reduction of real estate rental income and real estate expenses related to lessor costs paid directly to third parties by lessees of approximately $0.3 million during the year ended June 30, 2019.

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, 2019, 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.

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Quarterly Financial Results Unaudited

12 Months Ended

Jun. 30, 2019

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Results (Unaudited)

18. Quarterly Financial Results (Unaudited)

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, 2019.  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, 2019												Fiscal Year Ended June 30, 2018
	Fourth Quarter			Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Net revenues(1)	$	15,082		$	14,084		$	15,541		$	6,473		$	2,091		$	(448	)	$	2,523		$	1,769
Operating costs and expenses		16,659			14,601			15,308			8,916			4,652			3,088			3,527			5,137
Operating loss from continuing    operations	$	(1,577	)	$	(517	)	$	233		$	(2,443	)	$	(2,561	)	$	(3,536	)	$	(1,004	)	$	(3,368	)
Income (loss) from continuing    operations	$	(998	)	$	322		$	(4,251	)	$	(1,941	)	$	(2,521	)	$	(4,234	)	$	(1,202	)	$	(3,384	)
Income (loss) from    discontinued operations		(50	)		3,879			(25	)		(68	)		(10	)		(155	)		-			-
Net income (loss) attributable to    Great Elm Capital    Group, Inc.	$	(794	)	$	4,236		$	(4,346	)	$	(2,004	)	$	(2,507	)	$	(4,361	)	$	(1,169	)	$	(3,030	)
Basic income (loss) from    continuing operations per    share	$	(0.03	)	$	0.02		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.17	)	$	(0.05	)	$	(0.13	)
Basic income (loss) from    discontinued operations per    share		(0.00	)		0.15			(0.00	)		(0.00	)		(0.00	)		(0.01	)		-			-
Basic income (loss) per share	$	(0.03	)	$	0.17		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.18	)	$	(0.05	)	$	(0.13	)
Diluted income (loss) from    continuing operations per    share	$	(0.03	)	$	0.02		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.17	)	$	(0.05	)	$	(0.13	)
Diluted income (loss) from    discontinued operations per    share		(0.00	)		0.15			(0.00	)		(0.00	)		(0.00	)		(0.01	)		-			-
Diluted income (loss) per share	$	(0.03	)	$	0.17		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.18	)	$	(0.05	)	$	(0.13	)
Shares used in computing:
Basic income (loss) per share		25,335			25,265			25,187			25,054			24,712			24,612			24,562			23,233
Diluted income (loss) per       share		25,335			25,277			25,187			25,054			24,712			24,612			24,562			23,233

(1) Investment management revenues are net of incentive fee reversals determined based upon a hypothetical liquidation of net assets at March 31, 2018.  The incentive fee reversal is related to the conversion of Avanti third lien notes, an investment of GECC, to common equity in March 2018.

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Income Taxes

12 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was signed into law.  Among other changes resulting from the Tax Act is a reduction in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018.  The Company remeasured certain deferred tax assets and liabilities based on the rate in which they are anticipated to be reversed in the future, which is generally 21%.  The amount recorded related to the remeasurement of the Company’s deferred tax balance was a tax expense of approximately $239.4 million and an off-setting adjustment to the valuation allowance.  The Company provides a full valuation allowance for all of its federal and state deferred tax assets, therefore the reduction in the federal deferred tax assets resulting from the Tax Act had no effect on the Company’s consolidated balance sheet or statement of operations as of and for the year ended June 30, 2018.  During the year ended June 30, 2019, the Company finalized the impact of the Tax Act with no adjustments to the preliminary amount necessary.

The Company had loss from continuing operations before provision for income taxes of $9.1 million, $11.7 million and $18.7 million for the years ended June 30, 2019, 2018 and 2017, respectively.  There was no foreign activity during these years.

The provision (benefit) for income taxes includes the following:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Current:
Domestic Income Tax	$	84		$	-		$	-
Foreign Income Tax		-			-			-
	$	84		$	-		$	-
Deferred:
Domestic Income Tax	$	(2,266	)	$	(329	)	$	(1,210	)
Foreign Income Tax		-			-			-
	$	(2,266	)	$	(329	)	$	(1,210	)
Total	$	(2,182	)	$	(329	)	$	(1,210	)

The Company recognized an income tax benefit from continuing operations of $2.2 million, $0.3 million, and $1.2 million for the years ended June 30, 2019, 2018 and 2017, respectively.

During 2019, the Company recognized an income tax benefit with respect to discontinued operations of $1.3 million related to intraperiod allocations.  In addition, the Company recognized an income tax benefit with respect to deferred tax liabilities of $0.9 million acquired in the durable medical equipment acquisition.  During 2017, the Company recognized income tax with respect to discontinued operations of $1.2 million related to intraperiod allocations.  During 2017, income tax expense from discontinued operations totaled $0.9 million, net of the release of $0.3 million of accrued taxes for divested foreign subsidiaries and other for taxes previously accrued by the subsidiaries. No intraperiod allocations were made in 2018.

The following table reconciles the expected corporate federal income tax expense (benefit), computed by multiplying the Company's income (loss) before income taxes by the statutory income tax rate of 21% for fiscal year 2019, 28.06% for fiscal year 2018 and 35% for fiscal year 2017:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Federal benefit at statutory rate	$	(1,900	)	$	(3,268	)	$	(6,523	)
State taxes		(427	)		(301	)		(794	)
Permanent adjustments		36			4			22
Change in valuation allowance		(5,788	)		(248,923	)		6,230
Provision to return true-up		(134	)		125			(87	)
Deferred remeasurement		(174	)		239,608			-
Net operating loss and credit expirations		6,335			11,805			-
Stock compensation adjustment		(122	)		607			-
Other		(8	)		14			(58	)
Total Tax Expense/(Benefit)	$	(2,182	)	$	(329	)	$	(1,210	)

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

	As of June 30,
(in thousands)	2019			2018
Deferred Tax Assets:
Net operating loss carryforwards	$	358,913		$	365,546
Accruals and allowances not deductible for tax purposes		2,399			1,945
Stock based compensation		799			684
Unrealized loss on investment		3,299			2,846
Lease liability		1,298			-
Interest expense carryforward		900			-
Total deferred tax assets, gross	$	367,608		$	371,021
Less: valuation allowance	$	(362,536	)	$	(368,322	)
Total deferred tax assets, net	$	5,072		$	2,699
Deferred Tax Liabilities:
Right to use asset	$	(1,611	)	$	(366	)
Acquired intangibles		(2,373	)		(1,735	)
Lease receivable		(240	)		(58	)
Goodwill		(456	)		-
Acquired indefinite lived assets		(724	)		(688	)
Total deferred tax liabilities	$	(5,404	)	$	(2,847	)
Total deferred tax liabilities, net (indefinite-lived assets)	$	(332	)	$	(148	)

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 $5.8 million in the overall valuation allowance relates primarily to the expiration of federal tax attributes and the impact of current year acquisitions partially offset by operating losses for which we currently do not provide a tax benefit.  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 an indefinite-lived real property which is not depreciable for US GAAP purposes as well as indefinite-lived goodwill that is not amortizable for US GAAP purposes.  As a result of the sale of the patent licensing business in fiscal year 2016, the Company does not have any foreign deferred tax assets as of June 30, 2019, 2018 and 2017.

As of June 30, 2019, the Company has net operating loss (NOL) carryforwards for federal and state income tax purposes of approximately $1.6 billion and $199 million, respectively.  The federal NOL carryforwards generated prior to fiscal year 2018 will expire from 2020 through 2037.  The federal NOL carryforwards generated in fiscal year 2018 or later may be carried forward indefinitely.  The California NOL carryforwards will expire from 2029 through 2037.  The Massachusetts NOL carryforwards will expire from 2031 to 2037.

The following table reflects federal NOL carryforwards that will expire beginning in the fiscal year ended June 30, 2020 (in thousands):

Fiscal Year of Expiration	Federal NOL carryforwards
2020	$	174,877
2021		504,561
2022		143,137
2023		131,077
2024		60,132
2025 through 2037		603,819
Indefinite		8,157
Total	$	1,625,760

Under Code Section 382, the utilization of a corporation's NOL carryforwards is limited following a change in ownership (as defined by the Code) of greater than 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 2019, 2018 and 2017 fiscal years, the total amount of gross unrecognized tax benefit activity was as follows (in thousands):

Balance as of June 30, 2016	$	12,966
Addition for tax positions of prior years		-
Reductions for tax positions of prior years		(54	)
Lapse of statute of limitations		(176	)
Balance as of June 30, 2017		12,736
Addition for tax positions of prior years		39,027
Reductions for tax positions of prior years		-
Lapse of statute of limitations		(417	)
Balance as of June 30, 2018		51,346
Addition for tax positions of prior years		-
Reductions for tax positions of prior years		(13	)
Lapse of statute of limitations		(879	)
Balance as of June 30, 2019	$	50,454.00

During the year ended June 30, 2019, the Company’s unrecognized tax benefits decreased by $0.9 million due to the expiration of the Company’s historical research and development credits for which an unrecognized tax benefit had been established.  During the year ended June 30, 2018, the Company’s unrecognized tax benefits increased by $38.6 million due to uncertainties associated with its historical research and development credits.  During the year ended June 30, 2017, the Company’s unrecognized tax benefits decreased by $0.2 million due to the expiration of certain statutes of limitations reflected in discontinued operations.

As of June 30, 2019 and 2018, the Company had approximately $50.5 million and $51.3 million, respectively, of unrecognized tax benefits.  The unrecognized tax benefits, if recognized, would impact the effective tax rate by $50.5 million and $51.3 million, respectively, for the years ended June 30, 2019 and 2018, 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, 2019 and 2018, 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, U.S. state and foreign tax returns.  Because of NOL carryforwards, substantially all of the Company's tax years, from the 1995 through 2019 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 2019 fiscal years, remain open to state tax examination.

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Fair Value Measurements - Summary of Assets and Liabilities Measured at Fair Value on Recurring and Non-recurring Basis (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Assets:
Total assets	$ 17,110
Liabilities:
Contingent consideration liability	1,135
Total liabilities	1,135
GECC
Assets:
Investment in GECC	17,110
Fair Value, Inputs, Level 1
Assets:
Total assets	17,110
Fair Value, Inputs, Level 1 | GECC
Assets:
Investment in GECC	17,110
Fair Value, Inputs, Level 3
Liabilities:
Contingent consideration liability	1,135
Total liabilities	$ 1,135

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Non-Controlling Interests and Preferred Stock of Subsidiary - Schedule of Preferred Stock Activity (Details)	12 Months Ended
	Jun. 30, 2019 shares
Equity [Abstract]
Issuance of preferred stock	5,266,000
Redemption of preferred stock	(5,266,000)

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Discontinued Operations - Additional Information (Details)				1 Months Ended	12 Months Ended
		Jan. 21, 2019 USD ($)	Jun. 30, 2016 USD ($) subsidiary	Oct. 31, 2016 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
Discontinued Operations [Line Items]
Discontinued operations, extinguishment of related liabilities					$ 3,608,000
Gain from disposal of discontinued operations, tax provision					1,285,000	$ 0	$ 917,000
Payment of fee split obligations							1,700,000
General and administrative expenses	[1]				87,000	165,000
General corporate overhead
Discontinued Operations [Line Items]
General and administrative expenses					0
Microsoft Litigation
Discontinued Operations [Line Items]
Settlement payment							8,800,000
Reimbursement of litigation costs				$ 1,900,000
Divesture
Discontinued Operations [Line Items]
Number of Wholly-owned subsidiaries Discontinued | subsidiary			2
Purchase price for divesture			$ 40,000,000
Divesture of businesses closing adjustment first amount			30,000,000
Divesture of businesses closing adjustment second amount			$ 10,000,000
Incremental cash receipt under mutual release and settlement agreement		$ 1,500,000
Settlement resulted in gain from discontinued operations					5,000,000
Discontinued operations, extinguishment of related liabilities					3,600,000
Receipt of cash from discontinued operations					1,500,000
Legal fees					100,000
Gain from disposal of discontinued operations, tax provision					$ 1,300,000
Remaining fee share contingent obligations						$ 3,600,000	$ 3,600,000

[1] During the year ended June 30, 2018, we incurred discontinued operating costs of $0.2 million related to the representations and warranties associated with the disposal of our legacy patent licensing business.

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Income Taxes - Provision (Benefit) for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Current:
Domestic Income Tax	$ 84
Current tax expense	84
Deferred:
Domestic Income Tax	(2,266)	$ (329)	$ (1,210)
Deferred tax expense	(2,266)	(329)	(1,210)
Total Tax Expense/(Benefit)	$ (2,182)	$ (329)	$ (1,210)

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Stockholders' Equity - Warrants - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Class Of Warrant Or Right [Line Items]
Warrants granted to purchase common stock		1,686,000
Estimated grant date fair value		$ 50
Number of days preceding the date notice of exercise		10 days
Warrants outstanding	0
Northern Right Capital Management, L.P.
Class Of Warrant Or Right [Line Items]
Cash proceeds from warrants exercised		$ 4,600
Warrant exercised		1,266,000
Class Of Warrant Or Right Exercise Price Of Warrants Or Rights1		$ 3.35
MAST
Class Of Warrant Or Right [Line Items]
Cash proceeds from warrants exercised	$ 1,400
Warrant exercised	420,000
Class Of Warrant Or Right Exercise Price Of Warrants Or Rights1	$ 3.60

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Fixed Assets - Summary of Reconciles Depreciation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Property Plant And Equipment [Line Items]
Total depreciation expense	$ 7,169	$ 1,124	$ 340
Durable Medical Equipment | Rental
Property Plant And Equipment [Line Items]
Total depreciation expense	5,550
Depreciation and Amortization
Property Plant And Equipment [Line Items]
Total depreciation expense	$ 1,619	$ 1,124	$ 340

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Related Party Transactions - Additional Information (Details) - USD ($) $ in Thousands		1 Months Ended	12 Months Ended
	Sep. 07, 2018	Sep. 30, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018
Related Party Transaction [Line Items]
Warrants granted to purchase common stock				1,686,000
Selling, general and administrative expense			$ 9,504	$ 6,699	$ 4,413
GECC
Related Party Transaction [Line Items]
Percentage of ownership interest (as a percent)			19.50%
Cost Sharing with MAST
Related Party Transaction [Line Items]
Non-reimbursable expenses paid			$ 0	400
Forfeiture of non-vested stock-based compensation		$ 500
Selling, general and administrative expense				100
Cost Sharing with MAST | Investment Management Expenses
Related Party Transaction [Line Items]
Expenses				$ 300	$ 1,800
DME Holdings
Related Party Transaction [Line Items]
Adjustment to net working capital			200
Redemption of preferred stock			$ 5,100
MAST Capital Management, LLC
Related Party Transaction [Line Items]
Warrants granted to purchase common stock		420,000	54,733
Percentage of ownership interest issued to former owner/holder			7.90%
GE FM Holdings
Related Party Transaction [Line Items]
Percentage of ownership interest issued to former owner/holder						19.90%
DME, Inc.
Related Party Transaction [Line Items]
Contingent consideration fair value	$ 1,000		$ 1,100
Payments of contingent consideration			$ 300
Adjustment to net working capital	$ (254)

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Stockholders' Equity - Assumptions Used to Value Options (Details) - Employee Stock Option	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award
Expected volatility, minimum	58.90%	60.80%	64.70%
Expected volatility, maximum	59.80%	63.40%	66.60%
Risk-free rate, minimum	2.27%	1.54%	1.50%
Risk-free rate, maximum	3.13%	2.52%	2.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Expected term (years)	6 years 3 months	3 years	6 years 3 months
Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Expected term (years)	6 years 6 months	6 years 6 months	7 years 3 months

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Income Taxes - Gross Unrecognized Tax Benefit Activity (Details) - USD ($)	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Income Tax Disclosure [Abstract]
Beginning Balance	$ 51,346,000	$ 12,736,000	$ 12,966,000
Addition for tax positions of prior years		39,027,000
Reductions for tax positions of prior years	(13,000)		(54,000)
Lapse of statute of limitations	(879,000)	(417,000)	(176,000)
Ending Balance	$ 50,454,000	$ 51,346,000	$ 12,736,000

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Document and Entity Information - USD ($)	12 Months Ended
	Jun. 30, 2019	Sep. 05, 2019	Dec. 31, 2018
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Trading Symbol	GEC
Entity Registrant Name	Great Elm Capital Group, Inc.
Entity Central Index Key	0001082506
Current Fiscal Year End Date	--06-30
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		25,382,503
Entity Public Float			$ 76,615,337
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity File Number	001-16073
Entity Tax Identification Number	943219054
Entity Address, Address Line One	800 South Street
Entity Address, Address Line Two	Suite 230
Entity Address, City or Town	Waltham
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02453
City Area Code	617
Local Phone Number	375-3006

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Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Depreciation expense	$ 7,169	$ 1,124	$ 340
Durable Medical Equipment | Rental
Depreciation expense	$ 5,550

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Segment Information (Tables)

12 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of Results of Operations by Segment

The following tables summarize the results of operations by segment.

	For the year ended June 30, 2019
(in thousands)	Durable Medical Equipment(4)			Investment Management			Real Estate			General Corporate			Reconciliation to Consolidated Total(1)			Consolidated Total
Revenue:
Total revenue	$	41,880		$	3,841		$	5,459		$	123		$	(123	)	$	51,180
Operating costs and expenses:
Cost of durable medical equipment sold and services		(11,463	)		-			-			-			-			(11,463	)
Cost of durable medical equipment rentals		(5,798	)		-			-			-			-			(5,798	)
Depreciation and amortization		(1,323	)		(631	)		(1,729	)		-			-			(3,683	)
Stock-based compensation(2)		-			(521	)		-			(457	)		-			(978	)
Transaction costs(3)		(551	)		-			-			(1,582	)		-			(2,133	)
Other selling, general and administrative		(20,260	)		(3,504	)		(884	)		(6,904	)		123			(31,429	)
Total operating expenses		(39,395	)		(4,656	)		(2,613	)		(8,943	)		123			(55,484	)
Other income (expense):
Interest expense		(3,415	)		(180	)		(2,655	)		-			-			(6,250	)
Other income (expense)		(177	)		-			-			1,682			-			1,504
Total other income (expense), net		(3,592	)		(180	)		(2,655	)		1,682			-			(4,746	)
Total pre-tax income (loss) from continuing operations	$	(1,107	)	$	(995	)	$	191		$	(7,138	)	$	-		$	(9,050	)

	For the year ended June 30, 2018
(in thousands)	Durable Medical Equipment(4)		Investment Management			Real Estate(5)			General Corporate			Reconciliation to Consolidated Total		Consolidated Total
Revenue:
Total revenue	$	-	$	4,085		$	1,850		$	-		$	-	$	5,935
Operating costs and expenses:
Depreciation and amortization		-		(585	)		(538	)		(1	)		-		(1,124	)
Stock-based compensation(2)		-		(3,487	)		-			(938	)		-		(4,425	)
Other selling, general and administrative		-		(4,719	)		(375	)		(5,761	)		-		(10,855	)
Total operating expenses		-		(8,791	)		(913	)		(6,700	)		-		(16,404	)
Other income (expense):
Interest expense		-		(217	)		(854	)		-			-		(1,071	)
Other income (expense)		-		13			-			(143	)		-		(130	)
Total other income (expense), net		-		(204	)		(854	)		(143	)		-		(1,201	)
Total pre-tax income (loss) from continuing operations	$	-	$	(4,910	)	$	83		$	(6,843	)	$	-	$	(11,670	)

	For the year ended June 30, 2017
(in thousands)	Durable Medical Equipment(4)		Investment Management			Real Estate(5)		General Corporate			Reconciliation to Consolidated Total		Consolidated Total
Revenue:
Total revenue	$	-	$	4,927		$	-	$	-		$	-	$	4,927
Operating costs and expenses:
Depreciation and amortization		-		(340	)		-		-			-		(340	)
Stock-based compensation(2)		-		(1,434	)		-		(529	)		-		(1,963	)
Other selling, general and administrative		-		(3,345	)		-		(3,884	)		-		(7,229	)
Total operating expenses		-		(5,119	)		-		(4,413	)		-		(9,532	)
Other income (expense):
Interest expense		-		(285	)		-		(6,036	)		-		(6,321	)
Other income (expense)		-		(12	)		-		(7,712	)		-		(7,724	)
Total other income (expense), net		-		(297	)		-		(13,748	)		-		(14,045	)
Total pre-tax income (loss) from continuing operations	$	-	$	(489	)	$	-	$	(18,161	)	$	-	$	(18,650	)

(1) The Company’s wholly-owned subsidiary, Great Elm DME Manager, LLC (DME Manager), provides advisory services to DME Inc. and receives consulting fee from DME Inc. for those services. DME Manager is considered part of the general corporate segment of the Company. The corresponding expense to DME Inc. and revenue to DME Manager are eliminated in consolidation.

(2) 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.

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

(4) Our durable medical equipment business began in September 2018 and there was no related activity prior to that date.

(5) Our real estate business began in March 2018 and there was no related activity prior to that date.

Schedule of Assets by Segment

The following tables summarize assets by segments:

	As of June 30, 2019
(in thousands)	Durable Medical Equipment		Investment Management		Real Estate		General Corporate		Total
Fixed assets, net	$	10,464	$	43	$	54,411	$	-	$	64,918
Identifiable intangible assets, net		9,297		2,910		5,369		-		17,576
Goodwill		50,397		-		-		-		50,397
Other assets		17,300		3,065		1,534		27,936		49,835
Total	$	87,458	$	6,018	$	61,314	$	27,936	$	182,726
	As of June 30, 2018
(in thousands)	Durable Medical Equipment		Investment Management		Real Estate		General Corporate		Total
Fixed assets, net	$	-	$	41	$	55,641	$	-	$	55,682
Identifiable intangible assets, net		-		3,531		5,869		-		9,400
Other assets		-		5,878		937		61,690		68,505
Total	$	-	$	9,450	$	62,447	$	61,690	$	133,587

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Summary of Significant Accounting Policies - Additional Information (Details)	12 Months Ended
	Jun. 30, 2019 USD ($) ReportingSegment Payor shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2017 shares	Jul. 01, 2018 USD ($)
Significant Accounting Policies [Line Items]
Number of Reportable Segments | ReportingSegment	4
Revenue reserve constraints on variable consideration	$ 3,400,000
Reduction in revenue	1,700,000
Unbilled receivables	$ 700,000
Term of contractual arrangement to provide investment management related services	3 years
Contractual arrangement expiration month and year	2019-11
Percentage of fees for investment management related services	26.00%
Potentially dilutive shares excluded from diluted net income (loss) per share | shares	3,438,353	3,443,979	1,923,279
Number of shares subject to forfeiture | shares	732,909
Accumulated deficit	$ (3,244,374,000)	$ (3,238,547,000)
Incentive fees receivable - related party		$ 2,919,000
Topic 606
Significant Accounting Policies [Line Items]
Accumulated deficit				$ (3,241,466,000)
Incentive fees receivable - related party				0
Topic 606 | Impact of accounting change
Significant Accounting Policies [Line Items]
Accumulated deficit				(2,919,000)
Incentive fees receivable - related party				$ (2,919,000)
ASU 2018-20
Significant Accounting Policies [Line Items]
Impact of adoption, Reduction of real estate rental income and real estate expenses related to lessor costs	$ 300,000
Revenues | Credit Concentration Risk
Significant Accounting Policies [Line Items]
Number of third party payor | Payor	2
Revenues | Credit Concentration Risk | Third Party-payor One
Significant Accounting Policies [Line Items]
Concentration risk, percentage	28.00%
Revenues | Credit Concentration Risk | Third Party-payor Two
Significant Accounting Policies [Line Items]
Concentration risk, percentage	11.00%
Accounts Receivable | Credit Concentration Risk | Third Party-payor One
Significant Accounting Policies [Line Items]
Concentration risk, percentage	20.00%
Accounts Receivable | Credit Concentration Risk | Third Party-payor Two
Significant Accounting Policies [Line Items]
Concentration risk, percentage	16.00%
Accounts Receivable | Credit Concentration Risk | Additional Third-party Payor
Significant Accounting Policies [Line Items]
Concentration risk, percentage	12.00%
GECC | Common Stock
Significant Accounting Policies [Line Items]
Percentage of outstanding shares, held	19.50%
MAST Capital Investor
Significant Accounting Policies [Line Items]
Percentage of outstanding shares, held	7.90%
Minimum
Significant Accounting Policies [Line Items]
Amortization period of intangible assets	5 years
Maximum
Significant Accounting Policies [Line Items]
Amortization period of intangible assets	15 years
Capped Rentals
Significant Accounting Policies [Line Items]
Title transfer period	13 months

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Organization

12 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization

1. Organization

Great Elm Capital Group, Inc. (referred to as the Company) is a holding company incorporated in Delaware.  The Company currently has four reportable segments: durable medical equipment, investment management, real estate and general corporate.  The Company is pursuing business development opportunities in durable medical equipment, investment management, real estate and other industries.

On September 27, 2016, the Company’s wholly-owned SEC-registered investment advisor subsidiary Great Elm Capital Management, Inc., a Delaware corporation (GECM), 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 Capital Corporation merged with and into GECC (the Merger), and GECM hired the employees of MAST Capital Management, LLC, a Delaware limited liability company (MAST Capital), to manage the assets of GECC.  Certain funds managed by MAST Capital own approximately 7.9% of the Company’s common stock.  Through the Company’s 80.1% owned subsidiary, GECC GP Corp. (GP Corp.), the Company acquired assets and assumed related liabilities associated with the on-going operations of GECM.  Approximately 5% of the 19.9% non-controlling interest of GP Corp. is owned by MAST Capital, and its affiliates and officers.

On September 7, 2018, the Company, through its majority-owned subsidiary, Great Elm DME Holdings, Inc. (DME Holdings), acquired an 80.1% equity interest in Great Elm DME, Inc. (DME Inc.) an entity formed to acquire and combine two companies Valley Healthcare Holding, LLC (Valley) 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.  On June 12, 2019, the Company expanded its durable medical equipment business through the acquisition of certain assets and liabilities of Midwest Respiratory Care, Inc. (Midwest).

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries.  Wholly-owned subsidiaries include Great Elm Capital Management, Inc. (GECM), Great Elm Opportunities GP, Inc., Great Elm FM Acquisition, Inc., DME Holdings and Great Elm DME Manager, LLC.  Majority-owned subsidiaries include GECC GP Corp., Great Elm FM Holdings, Inc., CRIC IT Fort Myers, LLC and DME Inc. and its seven wholly-owned subsidiaries.

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Revenue - Additional Information (Details) - USD ($)	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Disaggregation Of Revenue [Line Items]
Contract with customer liability	$ 0
Minimum
Disaggregation Of Revenue [Line Items]
Incentive fee earned as percentage on investment performance	5.00%
Equipment Lease Term	10 months
Maximum
Disaggregation Of Revenue [Line Items]
Incentive fee earned as percentage on investment performance	20.00%
Equipment Lease Term	36 months
GECC
Disaggregation Of Revenue [Line Items]
Annual rate of base management fee earned as percentage of average adjusted gross assets	1.50%
Equipment Sales
Disaggregation Of Revenue [Line Items]
Contract with customer liability		$ 0
Contract with customer, asset		0
Equipment Sales | Accounts Receivable
Disaggregation Of Revenue [Line Items]
Unbilled revenue	$ 500,000
Equipment Rental
Disaggregation Of Revenue [Line Items]
Contract with customer liability	900,000	0
Unbilled revenue		$ 0
Equipment Rental | Accounts Receivable
Disaggregation Of Revenue [Line Items]
Unbilled revenue	$ 200,000

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Summary of Significant Accounting Policies - Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Accounting Policies [Abstract]
Loss from continuing operations	$ (998)	$ 322	$ (4,251)	$ (1,941)	$ (2,521)	$ (4,234)	$ (1,202)	$ (3,384)	$ (6,868)	$ (11,341)	$ (17,440)
Income (loss) from discontinued operations, net of tax	(50)	3,879	(25)	(68)	(10)	(155)			3,736	(165)	2,203
Net loss									(3,132)	(11,506)	(15,237)
Less: net income (loss) attributable to non-controlling interest									(224)	(439)	(30)
Net income (loss) attributable to Great Elm Capital Group	$ (794)	$ 4,236	$ (4,346)	$ (2,004)	$ (2,507)	$ (4,361)	$ (1,169)	$ (3,030)	$ (2,908)	$ (11,067)	$ (15,207)
Weighted average shares basic and diluted:
Weighted average shares of common stock outstanding									25,210	24,277	16,433
Weighted average shares used in computing income (loss) per share									25,210	24,277	16,433
Basic and diluted income (loss) per share from:
Income (loss) from continuing operations									$ (0.26)	$ (0.45)	$ (1.06)
Income (loss) from discontinued operations									0.15	(0.01)	0.13
Net income (loss)									$ (0.11)	$ (0.46)	$ (0.93)

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Acquisitions - Pro Forma Results Pursuant to Requirements of ASC Topic 805 (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
DME, Inc.
Business Acquisition [Line Items]
Revenues	$ 59,529	$ 53,107
Net loss	(2,946)	(11,591)
Net loss attributable to Great Elm Capital Group	(2,397)	(11,497)
Midwest Respiratory Care, Inc.
Business Acquisition [Line Items]
Revenues	54,520	9,275
Net loss	(2,165)	(10,764)
Net loss attributable to Great Elm Capital Group	$ (2,113)	$ (10,493)

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Borrowings - Schedule of Payments and Interest Expense Incurred (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Corbel Facility
Debt Instrument [Line Items]
Principal payments	$ 625
Interest expense	2,617
GP Corp. Note | Acquisition Agreement with MAST Capital
Debt Instrument [Line Items]
Principal payments	76	$ 712	$ 36,838
Interest expense	$ 181	$ 217	$ 285

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Goodwill and Other Intangible Assets - Summary of Acquired Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 20,694	$ 10,454
Accumulated Amortization	(3,118)	(1,054)
Net Carrying Amount	17,576	9,400
Durable Medical Equipment Assets
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	10,240
Accumulated Amortization	(943)
Net Carrying Amount	9,297
Durable Medical Equipment Assets | Trade Name
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	8,800
Accumulated Amortization	(733)
Net Carrying Amount	8,067
Durable Medical Equipment Assets | Non-compete Agreements
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,440
Accumulated Amortization	(210)
Net Carrying Amount	1,230
Investment Management Assets
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	4,426	4,426
Accumulated Amortization	(1,516)	(895)
Net Carrying Amount	2,910	3,531
Investment Management Assets | Investment Management Agreement
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	3,900	3,900
Accumulated Amortization	(1,336)	(789)
Net Carrying Amount	2,564	3,111
Investment Management Assets | Assembled Workforce
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	526	526
Accumulated Amortization	(180)	(106)
Net Carrying Amount	346	420
Real Estate Assets | In-place Lease
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	6,028	6,028
Accumulated Amortization	(659)	(159)
Net Carrying Amount	$ 5,369	$ 5,869

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Lessee Operating Leases - Schedule of Operating Lease Cost (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Buildings
Operating Leased Assets [Line Items]
Operating lease cost	$ 1,777	$ 353	$ 723
Cash paid for operating leases	1,720	$ 920	$ 786
Vehicles
Operating Leased Assets [Line Items]
Operating lease cost	23
Cash paid for operating leases	23
Equipment
Operating Leased Assets [Line Items]
Operating lease cost	31
Cash paid for operating leases	$ 31

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Stockholders' Equity - Shares of Common Stock Reserved For Issuance (Details)	Jun. 30, 2019 shares
Share-based Compensation Arrangement by Share-based Payment Award
Common stock available for grant	2,010,209
Director's Plan
Share-based Compensation Arrangement by Share-based Payment Award
Common stock available for grant	24,166
2016 Long-Term Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award
Common stock available for grant	1,042,043
2016 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award
Common stock available for grant	944,000

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SCHEDULE III - Real Estate and Accumulated Depreciation (Details) - USD ($) $ in Thousands		12 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
Gross amount of which carried at close of period, Total		$ 56,025	$ 56,025
Accumulated depreciation		1,614	$ 384
Gartner I and Gartner II | Fort Myers, FL
Encumbrances		55,438
Initial cost to company, Land		9,170
Initial cost to company, Buildings and improvements		46,855
Gross amount of which carried at close of period, Land	[1],[2]	9,170
Gross amount of which carried at close of period, Buildings and improvements	[1],[2]	46,855
Gross amount of which carried at close of period, Total	[1],[2]	56,025
Accumulated depreciation	[1]	$ 1,614
Date acquired		Mar. 06, 2018

[1] All property was acquired during the year ended June 30, 2018 as part of the real estate transaction described more fully in Note 4 of the Notes to the Consolidated Financial Statements. Reconciliation of total real estate carrying value and accumulated depreciation for the years ended June 30, 2019 and 2018 are as follows: (in thousands) Real Estate Accumulated Depreciation Balance as of June 30, 2017 $- $- Acquisitions 56,025 - Depreciation expense - 384 Balance as of June 30, 2018 56,025 384 Depreciation expense - 1,230 Balance as of June 30, 2019 $56,025 $1,614

[2] The aggregate cost for federal income tax purposes was $64.5 million at June 30, 2019.

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Fair Value Measurements

12 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

8. Fair Value Measurements

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:

▪ Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

▪ Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

▪ Level 3: Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value.  These assumptions are required to be consistent with market participant assumptions that are reasonably available.

All financial assets or liabilities that are measured at fair value on a recurring and 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 basis are summarized in the table below:

	Fair Value as of June 30, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment in GECC	$	17,110	$	-	$	-	$	17,110
Total assets	$	17,110	$	-	$	-	$	17,110
Liabilities:
Contingent consideration liability	$	-	$	-	$	1,135	$	1,135
Total liabilities	$	-	$	-	$	1,135	$	1,135

The only recurring fair value measurements at June 30, 2018 was the investment in GECC which did not have any restrictions at that date.  The investment in GECC was valued using Level 1 inputs at June 30, 2018.

The following is a reconciliation of changes in contingent consideration, a Level 3 liability, for the year ended June 30, 2019:

(in thousands)
Balance as of June 30, 2018	$	-
Additions		961
Payments		(295	)
Change in fair value		469
Balance as of June 30, 2019	$	1,135

There were no Level 3 assets or liabilities held during the year ended June 30, 2018.

Contingent consideration is included within the current portion of related party payables in the consolidated balance sheets.  The contingent consideration arrangement required the Company to pay up to $2.4 million of additional consideration to the acquired companies’ former shareholders if certain EBITDA thresholds, as adjusted per the terms of the purchase agreement, are achieved for the 12 months ended December 31, 2018 and 2019.  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 September 7, 2018 are as follows: 33.5% volatility and weighted average cost of capital of 14% and related EBITDA forecasts of the acquired businesses for the years ended December 31, 2018 and 2019.  A fair value of $1.0 million was calculated as of the acquisition date.

In June 2019, in conjunction with the Midwest acquisition, there was an amendment to the Transaction Agreement which adjusted certain terms of the related EBITDA target calculation for the 12 months ended December 31, 2019, making it easier to achieve.  As part of this amendment, a payment of $0.3 million was made to certain former shareholders.  The fair value of the remaining contingent consideration was updated to $1.1 million as of June 30, 2019, resulting in a $0.4 million charge which is included in sales, general and administrative expenses.  The valuation as of June 30, 2019 utilized a 27.4% volatility rate and weighted average cost of capital of 12% and estimate of forecasted adjusted EBITDA of the business.

The ultimate payout of the contingent consideration will be based on actual results achieved. As the fair value of the contingent consideration changes until finalized with the results for the twelve months ended December 31, 2019, these changes may have a material impact on earnings.  The Company determined that the EBITDA achieved, as adjusted per terms of the contract, for the 12 months ended December 31, 2018 was below the earnout threshold for payout, however, $0.3 million was paid to the sellers in June 2019 related to the year ended December 31, 2019.  An additional contingent consideration payment of up to $2.1 million may be due to the sellers following completion of the review process or if the applicable targets are met during the year ended December 31, 2019.

The Company owns approximately 19.5% (or 1,966,667 shares) of the outstanding shares of GECC and values its ownership based on the NASDAQ-listed market price of GECC common stock (a Level 1 input in accordance with the US GAAP fair value hierarchy).

The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred.  There were no transfers between levels of the fair value hierarchy during the years ended June 30, 2019 and 2018.

See Note 11 - 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.

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Acquisitions

12 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Acquisitions

4. Acquisitions

Durable Medical Equipment Acquisitions

In September 2018, through its subsidiary, DME Holdings, the Company acquired an 80.1% interest in DME Inc., an entity formed to acquire and combine two previously unrelated durable medical equipment distribution companies, Valley and Northwest, which both specialize in the distribution of sleep and respiratory care equipment, including positive air pressure equipment and supplies, ventilators, and oxygen equipment.  The medical distribution companies operate in Alaska, Arizona, Nebraska, Oregon and Washington.  The Company expects to achieve significant synergies and costs reductions through the combination of these companies in this acquisition.  Operating results of the acquired businesses have been included in the consolidated statements of operations since September 1, 2018 as the impact of including the period prior to September 7, 2018 was immaterial to the consolidated financial statements.

On the date of acquisition, the Company allocated the consideration given to the individual assets acquired and the liabilities assumed based on a preliminary estimate of their fair values.  The assessment of fair value initially reported, as of and for the three months ended September 30, 2018, was preliminary as the Company had not finalized its fair value estimates.

During the nine months ended June 30, 2019, the Company obtained and considered additional information related to the assets acquired and liabilities assumed, and recorded measurement period adjustments to the allocation of the purchase price noted below.  The Company is still performing final evaluation of the acquired assets and liabilities assumed as of the acquisition date and all amounts are preliminary.  The Company is also in the process of obtaining finalized third-party tax returns and related support for purposes of finalizing the valuation of acquired tax attributes, which impacts the deferred tax balances at acquisition and the Company’s pre-existing valuation allowance at the acquisition date.  As such, the valuation of acquired tax attributes is preliminary and is subject to change as this provisional amount is finalized.

The acquisition date fair value of the consideration transferred is summarized in the following table:

(in thousands)	As Previously Reported(1)		Adjustment			As Adjusted
Cash	$	25,321	$	-		$	25,321
Net working capital adjustment		-		(254	)		(254	)
Increase in note payable to seller(2)		16,500		-			16,500
Debt assumed		9,275		-			9,275
Preferred stock in DME Holdings		5,266		-			5,266
Contingent consideration		1,225		(264	)		961
Total Consideration	$	57,587	$	(518	)	$	57,069

(1) As reported in our Form 10-Q for the three months ended September 30, 2018.

(2) Included in related party note payable on the consolidated balance sheet.

As a result of the adjustment to net working capital adjustment, $0.2 million in shares of preferred stock in DME Holdings were cancelled and forfeited and the remaining difference between the adjustment and the value of the preferred stock cancelled and forfeited was paid by the sellers to DME Holdings.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

(in thousands)	As Previously Reported(1)			Adjustment			As Adjusted
Accounts receivable	$	5,363		$	658		$	6,021
Inventories		1,546			(141	)		1,405
Other assets		503			-			503
Fixed assets		852			-			852
Equipment held for rent		8,470			(523	)		7,947
Goodwill		46,222			(1,481	)		44,741
Tradename		6,900			1,900			8,800
Non-compete agreements		1,450			(190	)		1,260
Right of use asset		4,205			-			4,205
Current liabilities		(6,374	)		419			(5,955	)
Operating lease liabilities		(4,285	)		-			(4,285	)
Deferred tax liabilities		-			(1,160	)		(1,160	)
Non-controlling interest		(7,265	)		-			(7,265	)
Net Assets Acquired	$	57,587		$	(518	)	$	57,069

(1) As reported in our Form 10-Q for the three months ended September 30, 2018.

The outstanding balances of the note payable to seller, debt assumed on the revolving credit facility, and the preferred stock in DME Holdings approximated fair value based upon current rates and terms available for similar instruments.

The trade name was determined to have a fair value of $8.8 million.  The valuation of the trade name was based on a relief from royalty method.  The key assumptions in applying the relief from royalty approach are as follows: royalty rate of 3.0% and a discount rate of 14%.

The non-compete agreements were determined to have a fair value of $1.3 million.  The valuation of the non-compete agreements was based on a lost profits method.  The key assumptions in applying the lost profits method are as follows; probability adjusted EBITDA of the acquired businesses and a discount rate of 14%.

Of the $10.1 million of acquired identifiable intangible assets, $8.8 million was assigned to tradenames and $1.3 million was assigned to non-compete assets, which are associated with the former sellers of the businesses.  All tradenames acquired have an expected life of 10 years over which they will be amortized on a straight-line basis, which matches the pattern of economic use of these assets.  The non-compete agreements have a weighted-average expected life of 4.2 years.  All non-compete agreements will be amortized on a straight-line basis, which approximates the pattern of economic use.  Neither tradenames nor the non-compete agreements have renewal terms or are expected to have any net realizable value at the end of their useful lives.

The contingent consideration arrangement requires the Company to pay up to $2.4 million of additional consideration to the acquired companies’ former shareholders if certain earnings before interest, taxes, depreciation and amortization (EBITDA) thresholds, as adjusted per the terms of the purchase agreement, are achieved for the 12 months ended December 31, 2018 and 2019.  Under the Transaction Agreement, payment of the contingent consideration for any period is subject to satisfaction of the applicable EBITDA, as adjusted threshold.  The fair value of the contingent consideration arrangement at the acquisition date was $1.0 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 as follows: 33.5% volatility and weighted-average cost of capital of 14%, and related EBITDA forecasts of the acquired businesses.  The contingent consideration is included within the current portion of related party payables in the consolidated balance sheets.

These fair value measurements are based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC Topic 820, Fair Value Measurement.  

Upon a subsequent sale of DME Inc., certain members of the DME Inc. management team will be entitled to a contingent bonus based on a percentage of the proceeds of the sale less the Company’s invested capital in DME Inc.

The $44.7 million of goodwill was assigned to the durable medical equipment segment and is attributable primarily to expected synergies and the assembled workforce of the acquired businesses.  Approximately $29.4 million of the goodwill is expected to be deductible for income tax purposes.  This amount is preliminary and subject to change as the provisional estimate is finalized.

The fair value of the 19.9% non-controlling interest in acquired companies is provisionally estimated to be $7.3 million. The fair value of the non-controlling interest was estimated based on the purchase price paid by the Company for its 80.1% of the acquired business since the non-controlling interest holders hold equity in DME Inc., which allows the holders to share in at least the same benefits inured from the acquisition as the Company.

The provisional amount of $1.2 million related to deferred tax liabilities relates primarily to identifiable intangible assets fair valued in purchase accounting that have no tax basis, as well as temporary differences of other acquired assets and liabilities.  The Company is in the process of obtaining the finalized third-party tax returns covering the pre-acquisition period in order to verify the income tax basis amounts related to assets acquired and liabilities assumed.  As a result, the related deferred tax balance sheet amounts and any potentially impacted income tax provision or benefit remain subject to adjustment once the final information becomes available and is evaluated by the Company.  The Company expects these provisional amounts to be resolved during the first quarter of fiscal 2020.  The reduction of the valuation allowance of the Company of $0.9 million directly attributable to the transaction was recognized as a benefit to the income tax provision in the year ended June 30, 2018.

The Company recognized $2.1 million of acquisition costs that were expensed in the year ended June 30, 2019.  These costs are included in general and administrative expenses in the accompanying consolidated statement of operations.  The Company also incurred $0.5 million in costs associated with issuing debt to finance the cost of the acquired businesses, which are debt issuance costs that are amortized over the term of the debt using the effective interest rate method.

Supplemental Pro Forma Information (unaudited)

The pro forma results presented below were prepared pursuant to the requirements of ASC Topic 805, Business Combinations, and give effect to the acquisition as if it had been consummated on July 1, 2017.  The pro forma results have been prepared for comparative purposes only and do not necessarily represent what revenue or results of operations would have been had the acquisition been completed on July 1, 2017.  In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved by the Company.

	For the years ended June 30,
(in thousands)	2019			2018
Revenues	$	59,529		$	53,107
Net loss		(2,946	)		(11,591	)
Net loss attributable to Great Elm Capital Group		(2,397	)		(11,497	)

These pro forma results presented include adjustments to historical operating results include the following activity related to the acquisition: (a) interest expenses incurred on the debt paid down and borrowed upon closing; (b) dividends on preferred stock in subsidiary; (c) amortization of intangible assets acquired; and (d) reclassification of non-recurring transaction costs to the prior period.

Acquisition of Midwest Respiratory Care, Inc. Assets and Liabilities

In June 2019, through its majority-owned subsidiary, DME Inc., the Company acquired certain assets and liabilities of Midwest related to its durable medical equipment business which specializes in the distribution of sleep and respiratory care equipment, including positive air pressure equipment and supplies, ventilators, and oxygen equipment.  The medical distribution business operates in Nebraska, Kansas and Iowa.  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 DME operations.  Operating results of the acquired businesses have been included in the consolidated statements of operations since June 12, 2019.

On the date of Acquisition, the Company allocated the consideration given to the individual assets acquired and the liabilities assumed based on a preliminary estimate of their fair values.  The Company is in the process of obtaining finalized third-party valuations of certain intangible assets and gathering information on all assets acquired and liabilities assumed, thus, all amounts re preliminary and are subject to change as these provisional estimates are finalized.

The acquisition date fair value of the cash consideration transferred was $6.3 million, of which $3.4 million was funded by additional debt under our existing Corbel Facility and $0.7 million was contributed by the non-controlling interests in DME Inc. on a pro rata basis with the Company.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

(in thousands)	Amount
Inventories	$	7
Other assets		1
Fixed assets		52
Equipment held for rent		447
Goodwill		5,656
Non-compete agreements		180
Right of use asset		238
Operating lease liabilities		(238	)
Net Assets Acquired	$	6,343

The non-compete agreements are associated with the sellers of the business and were determined to have a fair value of $0.2 million.  The agreements have a weighted-average expected life of 5 years and will be amortized on a straight-line basis, which approximates the pattern of economic use.  The non-compete agreements have no renewal terms and are not expected to have any net realizable value at the end of their useful lives. The valuation of the non-compete agreements was based on a lost profits method.  The key assumptions in applying the lost profits method are as follows; probability adjusted EBITDA of the acquired business and a discount rate of 27%.

These fair value measurements are based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC Topic 820, Fair Value Measurement.  

The $5.7 million of 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.

Supplemental Pro Forma Information (unaudited)

The pro forma results presented below were prepared pursuant to the requirements of ASC Topic 805, Business Combinations, and give effect to the acquisition as if it had been consummated on July 1, 2017.  The pro forma results have been prepared for comparative purposes only and do not necessarily represent what revenue or results of operations would have been had the acquisition been completed on July 1, 2017.  In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved by the Company.

	For the years ended June 30,
(in thousands)	2019			2018
Revenues	$	54,520		$	9,275
Net loss		(2,165	)		(10,764	)
Net loss attributable to Great Elm Capital Group		(2,113	)		(10,493	)

These pro forma results presented include adjustments to historical operating results include the following activity related to the acquisition: (a) interest expense and debt financing costs incurred on the debt borrowed upon closing; (b) amortization of intangible assets acquired; and (c) reclassification of non-recurring transaction costs to the prior period.

The amounts of revenue and net loss of the combined acquired durable medical equipment businesses included in the Company’s consolidated statement of operations from the date of acquisition through June 30, 2019 is $41.9 million and $1.1 million.

Real Estate Acquisition

In March 2018, through its majority-owned subsidiary, Great Elm FM Holdings, Inc. (FM Holdings), the Company acquired an 80.1% interest in CRIC IT Fort Myers LLC (Property Owner) and a 19.9% interest was issued to the prior owner.  The Property Owner owns a fee simple interest in two Class A office buildings, Gartner I and Gartner II, situated on 17 acres of land in Fort Myers, FL (collectively, Property).  The Property Owner’s business activities are limited to the leases associated with the Property and under the terms of its borrowing arrangements the Property Owner has significant limitations on its business operations that essentially limit its activities to holding and leasing the Property.

To acquire its interest in the Property Owner, the Company paid a cash purchase price of approximately $2.7 million, incurred transaction costs of approximately $0.3 million, and issued a 19.9% non-controlling interest in the Property Owner valued at $0.7 million.  The transaction was an asset acquisition as substantially all of the value of the acquired assets related to the Property.  The Property Owner had two notes issued with a fair value of approximately $58 million at the acquisition date.  See Note 11 – Borrowings.

The following table summarizes the acquisition cost and the allocation to the assets acquired and liabilities assumed based on the relative fair values on the date of acquisition:

(in thousands)	Amount
Cash consideration	$	2,700
Cash and restricted cash acquired		(606	)
Transaction costs		261
Total consideration, net of cash and restricted cash acquired	$	2,355
Buildings	$	43,355
Land and site improvements		9,170
In-place lease intangible asset		6,028
Tenant improvements		3,500
Other assets		253
Senior note payable assumed		(52,227	)
Subordinated note payable assumed		(5,789	)
Deferred tax liability		(478	)
Other liabilities assumed		(786	)
Non-controlling interests		(671	)
Net assets acquired	$	2,355

The assigned values were based on the relative fair value of the net acquired assets.  The valuation of the Property considered both an income and cost approach to determine the fair value of the buildings, leasehold improvements, land, and site improvements.  The value of the in-place lease intangible was based on an income approach that considered the value of the lease to the Company.  These valuations included significant non observable inputs to the valuation model and therefore were level 3 fair value measurements in the fair value hierarchy.  The assumed debt obligations were valued using an income method considering market interest rates for similar instruments, which is a level 2 fair value measurement, at the acquisition date.

In connection with the acquisition, the acquired tax basis differed from the assigned book basis and the simultaneous equation method was used to assign the value of the asset and the related deferred tax liability.  The reduction of the valuation allowance of the Company of $0.3 million directly attributable to the transaction was recognized as a benefit to the income tax provision in the year ended June 30, 2018.

In the event of a refinancing or restructuring of the assumed debt obligations, the transfer of all or substantially all of the consolidated assets of FM Holdings and its subsidiaries, the transfer of a majority of the outstanding shares of FM Holdings to another party or merger of FM Holdings with another party, FM Holdings will incur a transaction fee to be paid to the Property Manager in accordance with the transaction Contract of Purchase and Sale.  The transaction fee will be 7% of net cash proceeds less any amounts owed under the debt obligations, actual out-of-pocket fees and expenses in connection with the acquisition described above, any reasonable out-of-pocket fees and expenses incurred in the transaction giving rise to the transaction fee, and our invested capital.

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Borrowings (Tables)

12 Months Ended

Jun. 30, 2019

Debt Instrument [Line Items]

Schedule of Related Party Borrowings of Subsidiaries

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

		As of June 30,
(in thousands)	Subsidiaries	2019			2018
Corbel Facility	DME Inc. and subsidiaries	$	27,584		$	-
GP Corp. Note	GECC GP Corp.		3,148			3,224
Total principal		$	30,732		$	3,224
Unamortized debt issuance cost			(364	)		-
Total long-term related party notes payable			30,368			3,224
Less current portion of related party notes payable			(2,066	)		-
Related party notes payable, net of current portion		$	28,302		$	3,224

Schedule of Subsidiaries' Other Outstanding Borrowings

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

		As of June 30,
(in thousands)	Subsidiaries	2019			2018
DME Revolver	DME Inc. and subsidiaries	$	7,401		$	-
Equipment Financing	DME Inc. and subsidiaries		1,475			-
Senior Note	CRIC IT		52,161			54,161
Subordinated Note	CRIC IT		3,277			2,823
Total principal		$	64,314		$	56,984
Unamortized debt premiums			3,205			3,131
Unamortized debt discounts and issuance costs			(2,250	)		(2,484	)
Total other outstanding borrowings			65,269			57,631
Less current portion of other outstanding borrowings			(3,530	)		(1,999	)
Other outstanding borrowings, net of current portion		$	61,739		$	55,632

Schedule of Aggregate Future Required Principal Debt Repayments

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

(in thousands)	Principal Due
For the year ending June 30, 2020	$	5,596
For the year ending June 30, 2021		11,276
For the year ending June 30, 2022		4,048
For the year ending June 30, 2023		4,195
For the year ending June 30, 2024		24,246
Thereafter		58,677
Total	$	108,038
Outstanding principal on related party borrowings	$	30,732
Outstanding principal on other borrowings		64,314
Future interest to be paid-in-kind		12,992
Total future required principal payments	$	108,038

Corbel Facility

Debt Instrument [Line Items]

Schedule of Payments and Interest Expense Incurred

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

	For the years ended June 30,
(in thousands)	2019		2018		2017
Principal payments	$	625	$	-	$	-
Interest expense		2,617		-		-

GP Corp. Note

Debt Instrument [Line Items]

Schedule of Payments and Interest Expense Incurred

The GP Corp. Note is held by MAST Capital, a related party.  Payments and interest expense incurred on the GP Corp. Note are summarized in the following table:

	For the years ended June 30,
(in thousands)	2019		2018		2017
Principal payments	$	76	$	712	$	36,838
Interest expense		181		217		285

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Revenue (Tables)

12 Months Ended

Jun. 30, 2019

Revenue From Contract With Customer [Abstract]

Summary of Major Source of Revenue

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

	For the years ended June 30,
(in thousands)	2019		2018		2017
Product and Services Revenue(1)
Investment Management
Management Fees	$	2,956	$	2,604	$	1,530
Incentive Fees		-		163		2,757
Administration Fees		885		1,318		640
		3,841		4,085		4,927
Durable Medical Equipment
Equipment Sales		22,400		-		-
Service Revenues		4,898		-		-
		27,298		-		-
Total product and services revenue	$	31,139	$	4,085	$	4,927
Rental Revenues
Real Estate
Rental Income		5,459		1,850		-
Durable Medical Equipment
Medical Equipment Rental Income		14,582		-		-
Total rental revenue		20,041		1,850		-
Total	$	51,180	$	5,935	$	4,927

(1) Revenue for sales of products or services recognized in the year ended June 30, 2019 was accounted for under Topic 606 and revenue for sales of products or services recognized in the years ended June 30, 2018 and 2017 was accounted for under Topic 605, as discussed in this note and Note 2 – Summary of Significant Accounting Policies.

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Lessor Operating Leases (Tables)

12 Months Ended

Jun. 30, 2019

Lessor Disclosure [Abstract]

Summary of Rental Income from Real Estate Leases

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

	For the years ended June 30,
(in thousands)	2019		2018
Revenues from base rents	$	4,603	$	1,473
Revenues from additional rental payments		856		377
Total rental revenues	$	5,459	$	1,850

Summary of Base Rents for Remaining Lease Term

The following table summarizes the base rents for the remaining lease term:

(in thousands)	Base Rent Payments
For the year ending June 30, 2020	$	4,120
For the year ending June 30, 2021		4,213
For the year ending June 30, 2022		4,312
For the year ending June 30, 2023		4,419
For the year ending June 30, 2024		4,529
Thereafter		28,673
Total base rent	$	50,266

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Commitments and Contingencies

12 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

16. Commitments and Contingencies

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

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Stockholders' Equity

12 Months Ended

Jun. 30, 2019

Equity [Abstract]

Stockholders' Equity

12. Stockholders' Equity

Rights Offering

In September 2016, the Company entered into a backstop investment agreement with a consortium of investors led by Gracie Investing LLC.  Members of the Company’s board of directors and a number of the Company’s employees were backstop investors.  In October 2016, the Company and the backstop providers amended and restated the backstop investment agreement which contemplated up to a $36.6 million investment in shares of the Company’s common stock.  In November 2016, the Company commenced a $45 million rights offering to its existing stockholders at a price of $3.285 per share.  The Company sold an aggregate of 12,755,200 shares of its common stock for gross proceeds of $41.9 million, which after deducting expenses, totaling approximately $2.4 million, resulted in net proceeds of $39.5 million in the rights offering; and 945,333 shares of its common stock for gross proceeds of $3.1 million from the backstop providers.

Tax Benefits Preservation Agreement

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% or more of the Company’s common stock and the ability of persons or entities now owning 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 one Preferred Stock Purchase Right (a Tax Right) for each outstanding share of common stock, par value $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, one 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 per share, of the Company at a cash exercise price of $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.

Stock Plans

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.  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.  As of June 30, 2019, the Company had a total of 2,000 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 one 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, 2019, 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 Capital Group, Inc.  2016 Long-Term Incentive Plan (the 2016 Long-Term Incentive Plan) and the Great Elm Capital 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.  As of June 30, 2019, the Company had a total of 3,221,668 shares outstanding under the 2016 Long-Term Incentive Plan and no shares were outstanding under the 2016 Employee Stock Purchase Plan.

The following table summarizes the number of common shares reserved for issuance under the plans discussed above as of June 30, 2019:

Shares of Common Stock Reserved for Issuance
Director's Plan	24,166
2006 Plan	-
2016 Long-Term Incentive Plan	1,042,043
2016 Employee Stock Purchase Plan	944,000
Total	2,010,209

Performance Shares (Restricted Stock Awards)

During the year ended June 30, 2019, there were no awards or forfeitures of restricted stock awards included in the below table and 732,909 remain outstanding as of June 30, 2019.  Restricted stock awards granted have both performance and service requirements in connection with the formation of the investment management business.  The vesting of these awards is subject to a five-year service requirement and an investment management cumulative revenue collection target of $40 million for the five-year period ended November 3, 2021. Additionally, in September 2017, the Company modified the restricted stock awards to include a provision for changes in control.  This modification did not result in the recognition of additional compensation cost.

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 June 30, 2019, the Company estimates that approximately 479,504 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 no forfeitures during the year ended June 30, 2019.

The aggregate grant date fair value of restricted stock granted during the 2019, 2018 and 2017 fiscal years was $0.6 million, $0.3 million and $4.5 million, respectively.  For the years ended June 30, 2019 and 2018, the total intrinsic value of restricted stock vested was $0.6 million and $1.2 million, respectively.  There was no restricted stock vested during the year ended June 30, 2017.

The activity of the Company’s restricted stock awards and units for the year ended June 30, 2019 was as follows:

Restricted Stock Awards and Restricted Stock Units	Restricted Stock (in thousands)			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2018		767		$	3.92
Granted		186			3.43
Vested		(171	)		3.53
Forfeited		-			-
Outstanding at June 30, 2019		782		$	3.89

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:

	As of June 30,
	2019		2018		2017
Expected volatility	58.9% - 59.8%		60.8% - 63.4%		64.7% - 66.6%
Expected dividends		-		-		-
Expected term (years)	6.25 - 6.50		3.00 - 6.50		6.25 - 7.25
Risk-free rate	2.27% - 3.13%		1.54% - 2.52%		1.50% - 2.00%

The option activity for the year ended June 30, 2019 was as follows:

Options	Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2018		2,676		$	4.31		7.44	$	70
Options granted		110			3.74
Exercised		(44	)		3.25
Forfeited, cancelled or expired		(86	)		3.62
Outstanding at June 30, 2019		2,656		$	4.33		6.49	$	1,590
Exercisable at June 30, 2019		1,717		$	4.72		5.45	$	945
Vested and expected to vest as of June 30, 2019		2,656		$	4.33		6.49	$	1,590

The weighted average grant date fair value of options, per share, granted during the 2019, 2018 and 2017fiscal years was $2.19, $1.95, and$3.68, respectively.  During the year ended June 30, 2019, the total intrinsic value of options exercised was approximately $0.1 million.  There were no options exercised during the year ended June 30, 2018.

Stock-based compensation expense totaled $1.0 million, $4.4 million, and $2.0 million for the years ended June 30, 2019, 2018 and 2017, respectively.  Stock-based compensation expense for the year ended June 30, 2018 included approximately $1.5 million related to modified and accelerated GP Corp. stock-based compensation charges as a result of the Company eliminating the vesting provisions and removing the call rights for the GP Corp. stock owned by employees of the Company.  The recognized stock-based compensation expense equaled the estimated fair value of the non-controlling interest held by our employees in GP Corp. at the time of the modification.

As of June 30, 2019 and 2018, the Company had unrecognized compensation cost related to all unvested share awards and options totaling $2.9 millionand $3.8 million, respectively, expected to be recognized as the awards and options vest over the next 1.6years.

GP Corp. Stock – Non-Controlling Interest

In September 2107, the Company eliminated the vesting provisions and removed the call rights for the GP Corp. stock owned by employees of the Company.  As a result of the elimination, the Company recognized stock-based compensation expense of $1.5 million for the year ended June 30, 2018, equal to the estimated fair value of the non-controlling interest held by our employees in GP Corp.

Other Equity Transactions

Warrants

During the year ended June 30, 2018, the Company issued warrants to purchase 1,686,000 shares of common stock with an estimated grant date fair value of $0.05 million.  The exercise price of the warrants was variable and based on the average of quoted market prices for the ten days preceding notice of exercise.  The Company utilized a Monte-Carlo simulation model to estimate the fair value of its equity-classified warrant issuances.

During the year ended June 30, 2019, the Company received cash proceeds totaling $1.4 million from the exercise of 420,000 warrants by MAST Capital at approximately $3.35 per share.  During the year ended June 30, 2018, the Company received cash proceeds totaling $4.6 million from the exercise of 1,266,000 warrants by a designee of Northern Right Capital Management, L.P at approximately $3.60 per share.  Matthew A. Drapkin, a member of the Company’s Board of Directors, is the Chief Executive Officer of Northern Right Capital Management, L.P.

There are no remaining warrants outstanding at June 30, 2019.

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SCHEDULE III - Real Estate and Accumulated Depreciation

12 Months Ended

Jun. 30, 2019

Real Estate And Accumulated Depreciation Disclosure [Abstract]

Real Estate and Accumulated Depreciation

SCHEDULE III

GREAT ELM CAPITAL GROUP, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION

June 30, 2019

(in thousands)			Initial cost to company				Gross amount of which carried at close of period(a)(b)									Life on which depreciation in latest
Description	Encumbrances		Land		Buildings and improvements		Land		Buildings and improvements		Total		Accumulated depreciation(a)		Date acquired	income statements is computed
Office buildings
Gartner I and II	$	55,438	$	9,170	$	46,855	$	9,170	$	46,855	$	56,025	$	1,614	03/06/18	(c)
Fort Myers, FL

(a) All property was acquired during the year ended June 30, 2018 as part of the real estate transaction described more fully in Note 4 of the Notes to the Consolidated Financial Statements.  Reconciliation of total real estate carrying value and accumulated depreciation for the years ended June 30, 2019 and 2018 are as follows:

(in thousands)	Real Estate		Accumulated Depreciation
Balance as of June 30, 2017	$	-	$	-
Acquisitions		56,025		-
Depreciation expense		-		384
Balance as of June 30, 2018		56,025		384
Depreciation expense		-		1,230
Balance as of June 30, 2019	$	56,025	$	1,614

(b) The aggregate cost for federal income tax purposes was $64.5 million at June 30, 2019.

(c) Depreciation is computed based on the following estimated lives:

Description	Life in Years
Real Estate Assets
Buildings	55
Site improvements	16
Tenant improvements	12

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Statement Of Financial Position [Abstract]
Investments, cost basis	$ 30,000
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	350,000,000	350,000,000
Common stock, shares issued	26,086,086	25,480,200
Common stock, shares outstanding	25,352,989	24,718,395

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands		12 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net loss		$ (3,132)	$ (11,506)	$ (15,237)
(Gain) loss from discontinued operations		(3,736)	165	(2,203)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		9,233	1,124	340
Stock-based compensation	[1]	978	4,425	1,963
Re-measurement of warrant liability			8	30
Unrealized loss on investments		1,062	2,714	9,114
Non-cash interest and amortization of debt issuance costs		877	245	2,802
Deferred tax benefit related to continuing operations		(2,266)	148
Other non-cash expense, net		1,170	47
Gain on sale of equipment held for rental		(399)
Change in fair value of contingent consideration		469
Changes in operating assets and liabilities:
Related party receivable		(83)	(440)	(3,817)
Accounts receivable		(2,811)	(197)
Inventories		62
Prepaid assets, deposits, and other assets		(225)	(117)	(81)
Operating leases		(1,075)	(254)
Related party payable		804
Accounts payable, accrued liabilities and other liabilities		350	(42)	(1,860)
Net cash provided by (used in) operating activities - continuing operations		1,278	(3,680)	(8,949)
Net cash provided by (used in) operating activities - discontinued operations		1,413	(165)	(1,542)
Net cash provided by (used in) operating activities		2,691	(3,845)	(10,491)
Cash flows from investing activities:
Acquisition of business, net of cash acquired		(48,124)		(100)
Asset Acquisition			(2,355)
Purchases of equipment held for rental		(6,848)
Proceeds from sale of equipment held for rental		878
Purchases of property and equipment		(809)	(13)	(35)
Deconsolidation of GECC into equity method investment				(30,000)
Net cash used in investing activities - continuing operations		(54,903)	(2,368)	(30,135)
Net cash used in investing activities		(54,903)	(2,368)	(30,135)
Cash flows from financing activities:
Proceeds on revolving line of credit		6,625
Principal payments on long term debt		(2,069)	(637)
Principal payments on related party notes payable		(768)	(76)	(36,838)
Principal payments on equipment financing		(167)
Proceeds from related party note payable		19,855
Proceeds from equipment financing		1,643
Debt financing costs		(488)
Redemption of preferred stock of subsidiary		(5,052)
Contingent consideration payment		(295)
Proceeds from issuance of common stock, gross		1,551	4,572	45,000
Proceeds from funding by non-controlling interest		667
Payment of equity issuance costs				(2,353)
Net cash provided by financing activities - continuing operations		21,502	3,859	5,809
Net cash provided by financing activities		21,502	3,859	5,809
Net decrease in cash, cash equivalents and restricted cash		(30,710)	(2,354)	(34,817)
Cash, cash equivalents and restricted cash at beginning of year		43,540	45,894	80,711
Cash, cash equivalents and restricted cash at end of year		12,830	43,540	45,894
Cash paid for interest		4,537	803	3,535
Non-cash investing and financing activities
Assumption of borrowings in connection with acquisition		9,275	58,016
Issuance of non-controlling interests in subsidiary in connection with acquisition		7,264	671	20
Issuance of related party note payable in acquisition				3,424
Preferred stock issued to seller in acquisition		5,266
Preferred stock cancelled and forfeited		215
Contingent consideration issued in connection with acquisition		961
Issuance of equity-linked instruments classified as warrant liability				$ 216
Warrant liability settled with common stock issuance			$ 194
Lease liabilities and right of use assets arising from operating leases		$ 1,445

[1] 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.

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Summary of Significant Accounting Policies - Estimated Useful Lives of Property, Equipment, Real Estate Assets and Rental Equipment (Parenthetical) (Details)	12 Months Ended
	Jun. 30, 2019
Leasehold Improvements | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	7 years

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Non-Controlling Interests and Preferred Stock of Subsidiary (Tables)

12 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Summary of Non-controlling Interest Balance on Consolidated Balance Sheet

The following table summarizes the non-controlling interest and preferred stock of subsidiary balances on the consolidated balance sheets:

	As of June 30,
(in thousands)	2019			2018
DME Holdings
Preferred stock classified as liability	$	-		$	-
DME Inc.
NCI classified as temporary equity		3,912			-
NCI classified as permanent equity		3,912			-
Total DME Inc.		7,824			-
GECC GP Corp.
NCI classified as permanent equity		(626	)		(465	)
GE FM Holdings
NCI classified as permanent equity		730			687
Total	$	7,928		$	222

Summary of Non-controlling Interest Balance on Consolidated Statements of Operations

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,
(in thousands)	2019			2018			2017
DME Holdings
Preferred stock classified as liability	$	-		$	-		$	-
DME Inc.
NCI classified as temporary equity		(53	)		-			-
NCI classified as permanent equity		(53	)		-			-
Total DME Inc.		(106	)		-			-
GECC GP Corp.
NCI classified as permanent equity		(160	)		(455	)		(30	)
GE FM Holdings
NCI classified as permanent equity		42			16			-
Total	$	(224	)	$	(439	)	$	(30	)

Schedule of Preferred Stock Activity

The following table summarizes the preferred stock activity for the year ended June 30, 2019:

(in thousands)
Balance as of June 30, 2018	-
Issuance of preferred stock	5,266
Redemption of preferred stock	(5,266	)
Balance as of June 30, 2019	-

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Quarterly Financial Results Unaudited (Tables)

12 Months Ended

Jun. 30, 2019

Quarterly Financial Information Disclosure [Abstract]

Summary of Unaudited Quarterly Operating Results

	Fiscal Year Ended June 30, 2019												Fiscal Year Ended June 30, 2018
	Fourth Quarter			Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Net revenues(1)	$	15,082		$	14,084		$	15,541		$	6,473		$	2,091		$	(448	)	$	2,523		$	1,769
Operating costs and expenses		16,659			14,601			15,308			8,916			4,652			3,088			3,527			5,137
Operating loss from continuing    operations	$	(1,577	)	$	(517	)	$	233		$	(2,443	)	$	(2,561	)	$	(3,536	)	$	(1,004	)	$	(3,368	)
Income (loss) from continuing    operations	$	(998	)	$	322		$	(4,251	)	$	(1,941	)	$	(2,521	)	$	(4,234	)	$	(1,202	)	$	(3,384	)
Income (loss) from    discontinued operations		(50	)		3,879			(25	)		(68	)		(10	)		(155	)		-			-
Net income (loss) attributable to    Great Elm Capital    Group, Inc.	$	(794	)	$	4,236		$	(4,346	)	$	(2,004	)	$	(2,507	)	$	(4,361	)	$	(1,169	)	$	(3,030	)
Basic income (loss) from    continuing operations per    share	$	(0.03	)	$	0.02		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.17	)	$	(0.05	)	$	(0.13	)
Basic income (loss) from    discontinued operations per    share		(0.00	)		0.15			(0.00	)		(0.00	)		(0.00	)		(0.01	)		-			-
Basic income (loss) per share	$	(0.03	)	$	0.17		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.18	)	$	(0.05	)	$	(0.13	)
Diluted income (loss) from    continuing operations per    share	$	(0.03	)	$	0.02		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.17	)	$	(0.05	)	$	(0.13	)
Diluted income (loss) from    discontinued operations per    share		(0.00	)		0.15			(0.00	)		(0.00	)		(0.00	)		(0.01	)		-			-
Diluted income (loss) per share	$	(0.03	)	$	0.17		$	(0.17	)	$	(0.08	)	$	(0.10	)	$	(0.18	)	$	(0.05	)	$	(0.13	)
Shares used in computing:
Basic income (loss) per share		25,335			25,265			25,187			25,054			24,712			24,612			24,562			23,233
Diluted income (loss) per       share		25,335			25,277			25,187			25,054			24,712			24,612			24,562			23,233

(1) Investment management revenues are net of incentive fee reversals determined based upon a hypothetical liquidation of net assets at March 31, 2018.  The incentive fee reversal is related to the conversion of Avanti third lien notes, an investment of GECC, to common equity in March 2018.

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Non-Controlling Interests and Preferred Stock of Subsidiary - Summary of Non-controlling Interest Balance on Consolidated Statements of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Net income (loss)
Total	$ (224)	$ (439)	$ (30)
DME, Inc.
Net income (loss)
NCI classified as temporary equity	(53)
NCI classified as permanent equity	(53)
Total	(106)
GECC GP Corp.
Net income (loss)
NCI classified as permanent equity	(160)	(455)	$ (30)
GE FM Holdings
Net income (loss)
NCI classified as permanent equity	$ 42	$ 16

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Income Taxes - Tax Effect of Temporary Differences of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Deferred Tax Assets:
Net operating loss carryforwards	$ 358,913	$ 365,546
Accruals and allowances not deductible for tax purposes	2,399	1,945
Stock based compensation	799	684
Unrealized loss on investment	3,299	2,846
Lease liability	1,298
Interest expense carryforward	900
Total deferred tax assets, gross	367,608	371,021
Less: valuation allowance	(362,536)	(368,322)
Total deferred tax assets, net	5,072	2,699
Deferred Tax Liabilities:
Right to use asset	(1,611)	(366)
Acquired intangibles	(2,373)	(1,735)
Lease receivable	(240)	(58)
Goodwill	(456)
Acquired indefinite lived assets	(724)	(688)
Total deferred tax liabilities	(5,404)	(2,847)
Total deferred tax liabilities, net (indefinite-lived assets)	$ (332)	$ (148)

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Lessor Operating Leases - Summary of Rental Income from Real Estate Leases (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Leases Operating [Abstract]
Revenues from base rents	$ 4,603	$ 1,473
Revenues from additional rental payments	856	377
Total rental revenues	$ 5,459	$ 1,850

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Related Party Transactions - Schedule of Activity and Outstanding Balances Between GECC and Company (Parenthetical) (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Related Party Transaction [Line Items]
Incentive fees receivable - related party	$ 2,919
GECC
Related Party Transaction [Line Items]
Incentive fees receivable - related party	$ 2,900

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Segment Information - Schedule of Results of Operations by Segment (Details) - USD ($) $ in Thousands		3 Months Ended																12 Months Ended
		Jun. 30, 2019		Mar. 31, 2019		Dec. 31, 2018		Sep. 30, 2018		Jun. 30, 2018		Mar. 31, 2018		Dec. 31, 2017		Sep. 30, 2017		Jun. 30, 2019	Jun. 30, 2018		Jun. 30, 2017
Revenue:
Total revenues		$ 15,082	[1]	$ 14,084	[1]	$ 15,541	[1]	$ 6,473	[1]	$ 2,091	[1]	$ (448)	[1]	$ 2,523	[1]	$ 1,769	[1]	$ 51,180	$ 5,935		$ 4,927
Operating costs and expenses:
Depreciation and amortization																		(3,683)	(1,124)		(340)
Stock-based compensation	[2]																	(978)	(4,425)		(1,963)
Transaction costs	[3]																	(2,133)
Other selling, general and administrative																		(31,429)	(10,855)		(7,229)
Total operating expenses		$ (16,659)		$ (14,601)		$ (15,308)		$ (8,916)		$ (4,652)		$ (3,088)		$ (3,527)		$ (5,137)		(55,484)	(16,404)		(9,532)
Other income (expense):
Interest expense																		(6,250)	(1,071)		(6,321)
Other income (expense)																		1,504	(130)		(7,724)
Total other income (expense), net																		(4,746)	(1,201)		(14,045)
Loss from continuing operations, before income taxes																		(9,050)	(11,670)		(18,650)
Reconciliation to Consolidated Total
Revenue:
Total revenues	[4]																	(123)
Operating costs and expenses:
Other selling, general and administrative	[4]																	123
Total operating expenses	[4]																	123
Durable Medical Equipment | Operating Segments
Revenue:
Total revenues	[5]																	41,880
Operating costs and expenses:
Depreciation and amortization	[5]																	(1,323)
Transaction costs	[3],[5]																	(551)
Other selling, general and administrative	[5]																	(20,260)
Total operating expenses	[5]																	(39,395)
Other income (expense):
Interest expense	[5]																	(3,415)
Other income (expense)	[5]																	(177)
Total other income (expense), net	[5]																	(3,592)
Loss from continuing operations, before income taxes	[5]																	(1,107)
Durable Medical Equipment | Sales and Services
Operating costs and expenses:
Total operating costs and expenses																		(11,463)
Durable Medical Equipment | Sales and Services | Operating Segments
Operating costs and expenses:
Total operating costs and expenses	[5]																	(11,463)
Durable Medical Equipment | Rental
Operating costs and expenses:
Total operating costs and expenses																		(5,798)
Durable Medical Equipment | Rental | Operating Segments
Operating costs and expenses:
Total operating costs and expenses	[5]																	(5,798)
Real Estate
Operating costs and expenses:
Total operating costs and expenses																		(884)	(375)
Real Estate | Operating Segments
Revenue:
Total revenues																		5,459	1,850	[6]
Operating costs and expenses:
Depreciation and amortization																		(1,729)	(538)	[6]
Other selling, general and administrative																		(884)	(375)	[6]
Total operating expenses																		(2,613)	(913)	[6]
Other income (expense):
Interest expense																		(2,655)	(854)	[6]
Total other income (expense), net																		(2,655)	(854)	[6]
Loss from continuing operations, before income taxes																		191	83	[6]
General Corporate | Operating Segments
Revenue:
Total revenues																		123
Operating costs and expenses:
Depreciation and amortization																			(1)
Stock-based compensation	[2]																	(457)	(938)		(529)
Transaction costs	[3]																	(1,582)
Other selling, general and administrative																		(6,904)	(5,761)		(3,884)
Total operating expenses																		(8,943)	(6,700)		(4,413)
Other income (expense):
Interest expense																					(6,036)
Other income (expense)																		1,682	(143)		(7,712)
Total other income (expense), net																		1,682	(143)		(13,748)
Loss from continuing operations, before income taxes																		(7,138)	(6,843)		(18,161)
Investment Management
Operating costs and expenses:
Total operating costs and expenses																		(4,025)	(8,206)		(4,779)
Investment Management | Operating Segments
Revenue:
Total revenues																		3,841	4,085		4,927
Operating costs and expenses:
Depreciation and amortization																		(631)	(585)		(340)
Stock-based compensation	[2]																	(521)	(3,487)		(1,434)
Other selling, general and administrative																		(3,504)	(4,719)		(3,345)
Total operating expenses																		(4,656)	(8,791)		(5,119)
Other income (expense):
Interest expense																		(180)	(217)		(285)
Other income (expense)																			13		(12)
Total other income (expense), net																		(180)	(204)		(297)
Loss from continuing operations, before income taxes																		$ (995)	$ (4,910)		$ (489)

[1] Investment management revenues are net of incentive fee reversals determined based upon a hypothetical liquidation of net assets at March 31, 2018. The incentive fee reversal is related to the conversion of Avanti third lien notes, an investment of GECC, to common equity in March 2018

[2] 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.

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

[4] The Company’s wholly-owned subsidiary, Great Elm DME Manager, LLC (DME Manager), provides advisory services to DME Inc. and receives consulting fee from DME Inc. for those services. DME Manager is considered part of the general corporate segment of the Company. The corresponding expense to DME Inc. and revenue to DME Manager are eliminated in consolidation.

[5] Our durable medical equipment business began in September 2018 and there was no related activity prior to that date.

[6] Our real estate business began in March 2018 and there was no related activity prior to that date.

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Stockholders' Equity - Stock Options - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Stockholders' Equity
Weighted average grant date fair value of options per share granted	$ 2.19	$ 1.95	$ 3.68
Exercised	(44,000)	0
Intrinsic value of options exercised	$ 0.1
Total unrecognized compensation cost	$ 2.9	$ 3.8
Stock-based compensation period for recognition	1 year 7 months 6 days
Employees and Directors
Stockholders' Equity
Stock-based compensation expense	$ 1.0	4.4	$ 2.0
GP Corp.
Stockholders' Equity
Stock-based compensation expense		$ 1.5

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation and Use of Estimates

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, recognition of rental income, estimates for contractual allowances, estimates for allowance for doubtful accounts, 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.

Principles of Consolidation

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 13 – 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 and consolidated statements of comprehensive income (loss).

Segments

Segments

The Company has four reporting segments: durable medical equipment, investment management, real estate, and general corporate.  The Company regularly reviews each segment for purposes of allocating resources and assessing performance.

Cash and Cash Equivalents

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.

The Company’s restricted cash consists of rental income received in advance and a portion of prior period rental income that is reserved for capital and certain operating expenses in connection with the Company’s real estate assets.

Accounts Receivable

Accounts Receivable

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 revenue reserves related to constraints on variable consideration were $3.4 million as of June 30, 2019.  During the year ended June 30, 2019, the Company recognized a reduction to revenue of $1.7 million related to such constraints.  See Note 3 – Revenue.

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, 2019 relating to prior periods.  Changes in variable consideration are recorded as a component of net revenues.

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 the allowance for doubtful accounts is immaterial.

As of June 30, 2019, the Company had unbilled receivables of approximately $0.7 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 billable and are therefore contract assets.  Such contract assets are included in accounts receivable in the consolidated balance sheets.

Investments and Restricted Investments

Investments and Restricted Investments

Investments and restricted investments consist of shares in Great Elm Capital Corp. (GECC), which is carried at fair value.  Restricted investments would represent a portion of the Company’s investment in GECC, which has been contributed as part of a required capitalization for an outstanding obligation.  As of June 30, 2019, there were no outstanding obligations which would require the restriction of any investment.  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

Fair Value Measurements

Fair Value Measurements

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

Property, Equipment, Real Estate Assets and Rental Equipment

Property, Equipment, Real Estate Assets 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.

Within the durable medical equipment businesses, the Company capitalizes the cost of equipment predominantly leased out to patient customers as such assets are acquired 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 as such assets are acquired 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
Real Estate Assets
Buildings	55
Site improvements	16
Tenant improvements	12
Property and Equipment
Leasehold improvements	lesser of 7 years or life of the lease
Vehicles	5
Sleep study equipment	5
Furniture and fixtures	1 to 5
Computer equipment and software	3
Rental Equipment
Medical equipment for lease	1 to 5

Inventories

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 our estimates of forecasted net sales.  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 no significant write-offs during the year ended June 30, 2019.

Goodwill and Other Identifiable Intangible Assets

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. 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.

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.

Long-lived Assets

Long-lived Assets

Long-lived assets include real estate assets, 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.  No such impairment triggering events were identified in the periods presented.

Leases and Right of Use Assets

Leases and Right of Use Assets

We determine if an arrangement is a lease at inception.  As of June 30, 2019, all of our leases are operating leases.  Operating leases are included in right of use assets (ROU), 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 commencement date in determining the present value of lease payments.  We use the implicit rate when readily determinable.  The ROU assets also includes 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, which are accounted for together as a single lease component.

At June 30, 2019, the majority of our lease liabilities and ROU assets were acquired with the durable medical equipment businesses as discussed in Note 4 – Acquisitions and the amounts disclosed on the consolidated balance sheet represent preliminary valuations.

Cost of Durable Medical Equipment Sold and Services

Cost of Durable Medical Equipment Sold and Services

Cost of durable medical equipment sold and services includes 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 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

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

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 has a three year 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.

Real Estate Expenses

Real Estate Expenses

The Company classifies all direct expenses of its real estate segment including: insurance, property management fees and other operating expenses in real estate expense in the accompanying consolidated statements of operations.  Under the terms of the lease, the Company may recover from the tenant certain expenses including: insurance and other operating expenses; the recovery of these expenses is recognized in rental income in the accompanying consolidated statements of operations, in the same periods as the expenses are incurred.

Depreciation and Amortization

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, which is based on its estimate of useful lives of the assets.

Stock-based Compensation

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

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.

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.

Business Combinations

Business Combinations 

Business combinations are accounted for at fair value. 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

Net Income (Loss) Per Share

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

	For the years ended June 30,
	2019			2018			2017
Loss from continuing operations	$	(6,868	)	$	(11,341	)	$	(17,440	)
Income (loss) from discontinued operations, net of tax		3,736			(165	)		2,203
Net income (loss)	$	(3,132	)	$	(11,506	)	$	(15,237	)
Less: net loss attributable to non-controlling interest		(224	)		(439	)		(30	)
Net income (loss) attributable to Great Elm Capital Group	$	(2,908	)	$	(11,067	)	$	(15,207	)
Weighted average shares basic and diluted:
Weighted average shares of common stock outstanding		25,210			24,277			16,433
Weighted average shares used in computing income (loss) per share		25,210			24,277			16,433
Basic and diluted income (loss) per share from:
Income (loss) from continuing operations	$	(0.26	)	$	(0.45	)	$	(1.06	)
Income (loss) from discontinued operations		0.15			(0.01	)		0.13
Net income (loss)	$	(0.11	)	$	(0.46	)	$	(0.93	)

As of June 30, 2019, 2018 and 2017, the Company had 3,438,353, 3,443,979, and1,923,279 potential shares of Company common stock, respectively, that are not included in the diluted net income (loss) per share calculation because to do so would be antidilutive.

As of June 30, 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.  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

Restrictions on Subsidiary Dividends

In the GP Corp. Note Agreement, GECC GP Corp. agreed not to declare any dividends until the GP Corp. Note is satisfied.  In the Senior Note and Subordinated Note, 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 Corbel Facility and DME Revolver.

Concentration of Risk

Concentration of Risk

The Company’s net investment revenue and receivables from continuing operations are attributable to the management of one investment vehicle, GECC.  GECC is a related party based on the Company owning approximately 19.5% of its outstanding common stock as of June 30, 2019.  See Note 5 – Related Party Transactions.

The Company’s real estate rental revenue from continuing operations is derived from one tenant.

The Company’s durable medical equipment revenue and related accounts receivable are concentrated with third-party Payors.  For the year ended June 30, 2019, two government program payor constituted approximately 28% and 11%, respectively, of consolidated revenues.  As of June 30, 2019, receivables from those government program payors constituted 20% and 16%, respectively, of our ending accounts receivable.  An additional third-party payor constituted another 12% of accounts receivables as of June 30, 2019.

A portion of the Company’s outstanding debt, the GP Corp. Note, is held by MAST Capital Management LLC (MAST Capital).  Funds affiliated with MAST Capital reported ownership of approximately 7.9% of the outstanding shares of the Company as of June 30, 2019.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

Revenue RecognitionIn May 2014, the Financial Accounting Standards Board (FASB) issued the New Revenue Standard, which replaced Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605), including industry-specific requirements, and provided companies with a single principles-based revenue recognition model for recognizing revenue from contracts with customers.  The core principle of the New Revenue Standard is that a company should recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

On July 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), (Topic 606) and related amendments, under the modified retrospective transition method.  Accordingly, the periods prior to adoption are presented under our prior accounting policies and we applied the new guidance to all open contracts with customers as of the implementation date.

The new guidance outlines a single revenue recognition model for all contracts with customers and provides a framework for addressing revenue recognition issues on a comprehensive basis.  The framework includes five steps:

1. Identifying the contract(s) with a customer.

2. Identifying the performance obligations in the contract.

3. Determining the transaction price.

4. Allocate the transaction price to the performance obligations in the contract.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The adoption of Topic 606 impacted the Company’s revenue recognition policy for incentive fee revenue associated with our investment management agreements.  The Company’s revenue recognition policy for rental revenue for its real estate segment did not change since the revenue recognition for such arrangements is outside the scope of Topic 606.

Under Topic 606, variable consideration such as incentive fees must be constrained (not recognized) if it is not probable that there would not be a significant reversal of recognized revenue.  There was no impact on the Company’s revenue recognition policy for management and administrative revenues as these amounts are not subject to constraint.  The Company fully constrained its performance-based incentive fee revenue in contrast to recognizing revenue based on a hypothetical liquidation of net assets on the reporting date and the distribution of the net proceeds in accordance with the respective investment management agreements under its prior policies.  Under the modified retrospective method, the cumulative effect of adopting Topic 606 was recognized as an adjustment to eliminate incentive fees receivable and increase accumulated deficit of $2.9 million and after such adjustment there were no incentive fees receivable.

The following table reflects the impact of the cumulative effect of the accounting changes upon the adoption of Topic 606 on the consolidated balance sheet as of the beginning of the period:

(in thousands)	As of June 30, 2018			Impact of accounting change			As of July 1, 2018
Incentive fees receivable - related party	$	2,919		$	(2,919	)	$	-
Accumulated deficit		(3,238,547	)		(2,919	)		(3,241,466	)

The following table shows the effect of the change in accounting on the consolidated statement of operations:

	For the year ended June 30, 2019
(in thousands)	Under Topic 605			Under Topic 606			Effect of Change
Investment management revenues	$	6,975		$	3,841		$	3,134
Durable medical equipment sales and services revenue		27,298			27,298			-
Total revenues accounted for under Topic 606	$	34,273		$	31,139		$	3,134
Total revenues		54,314			51,180			3,134
Net income (loss) from continuing operations		(3,734	)		(6,868	)		3,134
Net income (loss)		2			(3,132	)		3,134
Net income (loss) attributable to Great Elm Capital Group		226			(2,908	)		3,134
Basic and diluted net income (loss) per share	$	0.01		$	(0.11	)	$	0.12

Fair Value Measurements In August 2018, the FASB issued 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.  ASU 2018-13 is effective for interim and annual periods beginning after December 15, 2019, with an option to early adopt any eliminated or modified disclosures, and to delay adoption of the additional disclosures, until the effective date.  The Company early adopted the eliminated and modified disclosures of ASU 2018-13 during the three months ended September 30, 2018 and, as a result, updated its financial statement disclosures accordingly. A modified narrative description of measurement uncertainty for level 3 fair value measurements was applied prospectively, with all other amendments applied retrospectively.

Lessor Lease Accounting In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors (ASU 2018-20).  The new guidance permits lessors, as an accounting policy election, to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs, and instead, account for those costs as lessee costs.  Additionally, the guidance updates revenue recognition related to variable payments by (1) requiring lessors to exclude from variable payments lessor costs paid directly to third parties by lessees; and (2) requiring lessors to allocate certain variable payments to lease and nonlease components when there are changes in facts and circumstances on which the variable payment is based.  When an allocation of variable payments between lease and nonlease components is made, the variable payment allocated to the lease component will be recognized as revenue in accordance with Topic 842, whereas the variable payment allocated to the nonlease component will be recognized in accordance with other applicable topics, such as Topic 606.  On January 1, 2019, the Company adopted ASU 2018-20 on a prospective basis and did not make the accounting policy election to account for certain taxes as lessee costs.  Sales and use taxes incurred and reimbursed by lessees related to our Real Estate business are recorded gross within real estate rental income and real estate expenses.  In addition, the adoption resulted in a reduction of real estate rental income and real estate expenses related to lessor costs paid directly to third parties by lessees of approximately $0.3 million during the year ended June 30, 2019.

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, 2019, 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.

Revenue

Revenue

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

	For the years ended June 30,
(in thousands)	2019		2018		2017
Product and Services Revenue(1)
Investment Management
Management Fees	$	2,956	$	2,604	$	1,530
Incentive Fees		-		163		2,757
Administration Fees		885		1,318		640
		3,841		4,085		4,927
Durable Medical Equipment
Equipment Sales		22,400		-		-
Service Revenues		4,898		-		-
		27,298		-		-
Total product and services revenue	$	31,139	$	4,085	$	4,927
Rental Revenues
Real Estate
Rental Income		5,459		1,850		-
Durable Medical Equipment
Medical Equipment Rental Income		14,582		-		-
Total rental revenue		20,041		1,850		-
Total	$	51,180	$	5,935	$	4,927

(1) Revenue for sales of products or services recognized in the year ended June 30, 2019 was accounted for under Topic 606 and revenue for sales of products or services recognized in the years ended June 30, 2018 and 2017 was accounted for under Topic 605, as discussed in this note and Note 2 – Summary of Significant Accounting Policies.

Revenue Accounting Under Topic 605

Our revenue recognition policy as it relates to investment management revenue transactions was accounted for under Topic 605 prior to July 1, 2018.  The revenue recognition policies under Topic 605 were consistent with the accounting policies under Topic 606 discussed below for management fees and administration fees.  The accounting for incentive fee revenue under Topic 605 is discussed in Note 2 – Summary of Significant Accounting Policies under Recently Adopted Accounting Standards – Revenue Recognition.  As noted therein, for the years ended June 30, 2018 and 2017, the Company applied the hypothetical liquidation of net assets method to calculate performance fees due as of the reporting date.  Under the application of Topic 606, such incentive fees have not been recognizable to date.

Revenue Accounting Under Topic 606

In determining the appropriate amount of revenue to be recognized under 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.

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.  There were no material changes in estimates recorded in the year ended June 30, 2019, relating to prior periods.

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

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 does not have any partially or unfilled performance obligations related to contracts with customers.  As such, the Company has no contract liabilities as of June 30, 2019.

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, 2019, net unbilled sales and service revenue is approximately $0.5 million and is included in accounts receivable.

We had no balances of contract assets or contract liabilities related to equipment sales and services as of June 30, 2018 as these contracts with customers were acquired in September 2018, with our acquisition of the durable medical equipment businesses.

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; as follows:

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.

Incentive Fees

The Company earns incentive fees based on the investment management agreements GECM has with GECC 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.  Incentive fees are recognized 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% to 20.0% 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.

Administration Fees

The Company earns administration fees based on the administration agreement GECM has with GECC whereby GECC reimburses GECM for costs incurred in performing administrative functions for GECC.  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 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.  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.

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, 2019, 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 $0.9 million as of June 30, 2019.

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, 2019, net unbilled rental revenue is approximately $0.2 million and is included in accounts receivable.

We had no balances related to deferred revenue or unbilled revenue related to equipment rentals as of June 30, 2018 as these balances were acquired in September 2018, with our acquisition of the durable medical equipment businesses.

Real Estate Revenue

Rental Revenue

Consistent with the leases of durable medical equipment, the Company recognizes rental revenue on a straight-line basis over the non-cancelable term of the lease.  Under the terms of the lease, the Company may recover from the tenant certain expenses, including: insurance and other operating expenses.  For all expenses that are paid by the Company and reimbursed by the tenant, the recovery of these expenses is recognized in rental income in the accompanying consolidated statements of operations, in the same periods as the expenses are incurred.  These expenses recognized in both revenue and expense may fluctuate from period to period based on actual expense amounts.

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Discontinued Operations

12 Months Ended

Jun. 30, 2019

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations

17. Discontinued Operations

On June 30, 2016, the Company sold two of its previously wholly-owned subsidiaries (the Divestiture) engaged in the patent licensing business for an aggregate purchase price of up to $40 million.  The purchaser paid the Company $30 million, plus certain adjustments, upon the closing of the Divestiture, and had made claims that it had incurred indemnifiable losses in excess of the remaining $10 million due under the purchase and sale agreement.

On January 21, 2019, we entered into a mutual release and settlement agreement with the purchaser resulting in the release of any indemnifiable liabilities and an incremental cash receipt of $1.5 million.  Prior to the execution of this settlement, the Company had determined that a loss related to final settlement with the purchaser was not realizable or estimable, and therefore had not accrued for any losses; however, the recognition of a portion of proceeds received associated with the former patent licensing business had been deferred pending finalization of all contingencies.  The settlement resulted in a $5.0 million gain in discontinued operations during the year ended June 30, 2019, consisting of the extinguishment of related liabilities of $3.6 million and the receipt of cash of $1.5 million from the purchaser, partially offset by legal fees of $0.1 million.  The net income from discontinued operations includes these gains, offset by a tax provision of $1.3 million for the year ended June 30, 2019.

The following table provides a reconciliation of the Company’s previous operations as reclassified for all of the periods presented:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Discontinued operations:
Net revenue	$	1,500		$	-		$	8,750
Patent licensing expenses(1)		-			-			(5,630	)
Extinguishment of liabilities related to discontinued operations		3,608			-			-
General and administrative expenses(2)		(87	)		(165	)		-
Pretax gain (loss) from discontinued operations		5,021			(165	)		3,120
Income tax benefit (expense)		(1,285	)		-			(917	)
Net gain (loss) from discontinued operations	$	3,736		$	(165	)	$	2,203

⁽¹⁾ Amounts for the year ended June 30, 2017 primarily consist of non-recurring fee split obligations associated with the Microsoft settlement as further discussed below.

⁽²⁾ During the year ended June 30, 2018, we incurred discontinued operating costs of $0.2 million related to the representations and warranties associated with the disposal of our legacy patent licensing business.

During the year ended June 30, 2017, the Company reached a final settlement with Microsoft Corporation for a one-time payment by Microsoft Corporation, related to an infringement judgment in our favor previously under appeal, of $8.8 million.  The payment, received in October 2016, included reimbursement of litigation costs incurred by the Company of approximately $1.9 million.  The settlement was paid to the Company as part of the Divesture and subject to fee split provisions.  During the year ended June 30, 2017, the Company paid $1.7 million with respect to its fee split obligations, all of which are classified as patent licensing expenses in the above table, with the purchaser of the divested subsidiaries.  As of June 30, 2018 and 2017, the Company has recorded estimated remaining fee share obligations associated with the Divesture totaling $3.6 million.

The Company did not allocate interest expense to discontinued operations and no general corporate overhead expenses have been reclassified to discontinued operations.

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Non-Controlling Interests and Preferred Stock of Subsidiary

12 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Non-Controlling Interests and Preferred Stock of Subsidiary

13. Non-Controlling Interests and Preferred Stock of Subsidiary

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 and preferred stock of subsidiary balances on the consolidated balance sheets:

	As of June 30,
(in thousands)	2019			2018
DME Holdings
Preferred stock classified as liability	$	-		$	-
DME Inc.
NCI classified as temporary equity		3,912			-
NCI classified as permanent equity		3,912			-
Total DME Inc.		7,824			-
GECC GP Corp.
NCI classified as permanent equity		(626	)		(465	)
GE FM Holdings
NCI classified as permanent equity		730			687
Total	$	7,928		$	222

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,
(in thousands)	2019			2018			2017
DME Holdings
Preferred stock classified as liability	$	-		$	-		$	-
DME Inc.
NCI classified as temporary equity		(53	)		-			-
NCI classified as permanent equity		(53	)		-			-
Total DME Inc.		(106	)		-			-
GECC GP Corp.
NCI classified as permanent equity		(160	)		(455	)		(30	)
GE FM Holdings
NCI classified as permanent equity		42			16			-
Total	$	(224	)	$	(439	)	$	(30	)

Preferred stock in DME Holdings classified as liability

In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued 5,266 shares of preferred stock in DME Holdings valued at $1,000 per share at issuance.  In January 2019, as a result of adjustments to the net working capital adjustment to the total consideration for the acquisition, 214 shares of preferred stock were cancelled and forfeited.  The Company redeemed an additional 1,500 shares of preferred stock in March 2019 and the remaining 3,552 shares of preferred stock were redeemed in June 2019.  As of June 30, 2019, there were no shares of preferred stock in DME Holdings outstanding.  The following table summarizes the preferred stock activity for the year ended June 30, 2019:

(in thousands)
Balance as of June 30, 2018	-
Issuance of preferred stock	5,266
Redemption of preferred stock	(5,266	)
Balance as of June 30, 2019	-

The preferred stock provided for a 10% annual dividend, which was payable semi-annually.  The preferred stock were mandatorily redeemable by the Company at their face value of $1,000 per share on the earlier of certain redemption events or September 7, 2038.  The redemption events included a change in control, initial public offering, liquidation of DME Holdings, or failure to pay dividends.  The preferred stock ranked senior and had preference to the common shares of DME Holdings.  The shares were non-voting, did not participate in the earnings of DME Holdings and contained standard protective rights.

As the preferred stock were mandatorily redeemable at a specified date, the security had been classified as a liability in the consolidated balance sheet for the interim periods during which the preferred stock were outstanding.  The dividends on the preferred stock are included in interest expense in the consolidated statement of operations.

Under the terms of the preferred stock, DME Holdings had to maintain a required level of capitalization.  At the option of the Company, such capitalization was required to be an amount in cash and/or common stock of GECC, net of any debt of DME Holdings, with an aggregate value greater than or equal to 125% of the value of the shares of preferred stock.  If at any month end the value of the qualifying assets fell below the required threshold, the Company contributed additional assets to meet the capitalization requirements.  Similarly, if at any month end the value of the qualifying assets exceeded the required threshold, the Company removed the excess assets.  This investment was classified as restricted investments in the consolidated balance sheet during the applicable interim periods.  Upon redeeming all the outstanding preferred stock in June 2019, the restriction on this investment was removed.

The preferred stock were held by Corbel, who is also the holder of the Corbel Facility and the non-controlling interest in DME Inc. classified as temporary equity discussed below.  See Note 5 – Related Party Transactions and Note 11 – Borrowings.

Non-controlling interest in DME Inc. classified as temporary equity

In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued a 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.

The holder of this non-controlling interest, Corbel, is a related party.  See Note 5 – Related Party Transactions and Note 11 – Borrowings.

Non-controlling interest in DME Inc. classified as permanent equity

In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued one of the former owners, a 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.

GECC GP Corp. – Non-controlling interest classified as permanent equity

In September 2017, the Company eliminated the vesting provisions and removed the call rights for the GECC GP Corp. stock owned by employees of the Company.  As a result of the elimination, the Company recognized stock-based compensation expense of $1.5 million, equal to the estimated fair value of the non-controlling interest held by our employees in GECC GP Corp.

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

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

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Stockholders' Equity (Tables)

12 Months Ended

Jun. 30, 2019

Equity [Abstract]

Summary of the Number of Common Shares Reserved for Issuance

The following table summarizes the number of common shares reserved for issuance under the plans discussed above as of June 30, 2019:

Shares of Common Stock Reserved for Issuance
Director's Plan	24,166
2006 Plan	-
2016 Long-Term Incentive Plan	1,042,043
2016 Employee Stock Purchase Plan	944,000
Total	2,010,209

Activity of Restricted Stock Award

The activity of the Company’s restricted stock awards and units for the year ended June 30, 2019 was as follows:

Restricted Stock Awards and Restricted Stock Units	Restricted Stock (in thousands)			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2018		767		$	3.92
Granted		186			3.43
Vested		(171	)		3.53
Forfeited		-			-
Outstanding at June 30, 2019		782		$	3.89

Schedule of the Ranges of Assumptions Used to Value Options Granted

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

	As of June 30,
	2019		2018		2017
Expected volatility	58.9% - 59.8%		60.8% - 63.4%		64.7% - 66.6%
Expected dividends		-		-		-
Expected term (years)	6.25 - 6.50		3.00 - 6.50		6.25 - 7.25
Risk-free rate	2.27% - 3.13%		1.54% - 2.52%		1.50% - 2.00%

Summary of Option Activity

The option activity for the year ended June 30, 2019 was as follows:

Options	Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2018		2,676		$	4.31		7.44	$	70
Options granted		110			3.74
Exercised		(44	)		3.25
Forfeited, cancelled or expired		(86	)		3.62
Outstanding at June 30, 2019		2,656		$	4.33		6.49	$	1,590
Exercisable at June 30, 2019		1,717		$	4.72		5.45	$	945
Vested and expected to vest as of June 30, 2019		2,656		$	4.33		6.49	$	1,590

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Discontinued Operation (Tables)

12 Months Ended

Jun. 30, 2019

Discontinued Operations And Disposal Groups [Abstract]

Reconciliation of Previous Operations as Reclassified for All Periods Presented

The following table provides a reconciliation of the Company’s previous operations as reclassified for all of the periods presented:

	For the years ended June 30,
(in thousands)	2019			2018			2017
Discontinued operations:
Net revenue	$	1,500		$	-		$	8,750
Patent licensing expenses(1)		-			-			(5,630	)
Extinguishment of liabilities related to discontinued operations		3,608			-			-
General and administrative expenses(2)		(87	)		(165	)		-
Pretax gain (loss) from discontinued operations		5,021			(165	)		3,120
Income tax benefit (expense)		(1,285	)		-			(917	)
Net gain (loss) from discontinued operations	$	3,736		$	(165	)	$	2,203

⁽¹⁾ Amounts for the year ended June 30, 2017 primarily consist of non-recurring fee split obligations associated with the Microsoft settlement as further discussed below.

⁽²⁾ During the year ended June 30, 2018, we incurred discontinued operating costs of $0.2 million related to the representations and warranties associated with the disposal of our legacy patent licensing business.

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Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Current assets:
Cash and cash equivalents	$ 12,122	$ 42,962
Restricted cash	708	578
Accounts receivable	8,832
Current portion of related party receivables	1,421	1,338
Investments, at fair value (cost $30,000)	17,110	18,172
Inventories	1,336
Prepaid and other current assets	871	544
Total current assets	42,400	63,594
Related party receivables, net of current		2,919
Real estate assets, net	54,411	55,641
Property and equipment, net	1,367	41
Equipment held for rental, net	9,140
Identifiable intangible assets, net	17,576	9,400
Goodwill	50,397
Right of use assets	6,239	1,521
Other assets	1,196	471
Total assets	182,726	133,587
Current liabilities:
Accounts payable	5,158	32
Accrued expenses and other liabilities	3,951	2,535
Related party payables	1,940
Current portion of lease liabilities	1,423	336
Current portion of long term debt	2,159	1,999
Current portion of related party notes payable	2,066
Current portion of equipment financing debt	1,371
Liabilities related to discontinued operations		3,608
Total current liabilities	18,068	8,510
Lease liabilities, net of current portion	5,110	1,304
Long term debt, net of current portion	61,635	55,632
Related party notes payable, net of current portion	28,302	3,224
Equipment financing debt, net of current portion	104
Other liabilities	513	331
Total liabilities	113,732	69,001
Commitments and Contingencies
Contingently redeemable non-controlling interest	3,912
Stockholders' equity
Preferred stock, $0.001 par value; 5,000 authorized and zero outstanding
Common stock, $0.001 par value; 350,000,000 shares authorized and 26,086,086 shares issued and 25,352,989 outstanding at June 30, 2019; and 25,480,200 shares issued and 24,718,395 outstanding at June 30, 2018	25	25
Additional paid-in-capital	3,305,415	3,302,886
Accumulated deficit	(3,244,374)	(3,238,547)
Total Great Elm Capital Group, Inc. stockholders' equity	61,066	64,364
Non-controlling interests	4,016	222
Total stockholders' equity	65,082	64,586
Total liabilities, non-controlling interest and stockholders' equity	$ 182,726	$ 133,587

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Consolidated Statements of Stockholders' Equity and Contingently Redeemable Non-controlling Interest - USD ($) $ in Thousands	Total	MAST	Midwest Respiratory Care, Inc.	GP Corp.	Great Elm DME, Inc.	CRIC IT Fort Myers LLC	Common Stock	Common Stock MAST	Additional Paid-in Capital	Additional Paid-in Capital MAST	Accumulated Deficit	Total Great Elm Capital Group Inc. Stockholders' Equity	Total Great Elm Capital Group Inc. Stockholders' Equity MAST	Non-controlling Interest	Non-controlling Interest Midwest Respiratory Care, Inc.	Non-controlling Interest GP Corp.	Non-controlling Interest Great Elm DME, Inc.	Non-controlling Interest CRIC IT Fort Myers LLC
Beginning balance at Jun. 30, 2016	$ 36,821						$ 9		$ 3,249,085		$ (3,212,273)	$ 36,821
Beginning balance (in shares) at Jun. 30, 2016							9,467,000
Net income (loss)	(15,237)										(15,207)	(15,207)		$ (30)
Acquisition				$ 20												$ 20
Issuance of common stock in rights offering, net of issuance costs	42,647						$ 12		42,635			42,647
Issuance of common stock in rights offering, net of issuance costs (in shares)							13,701,000
Issuance of common stock related to vesting of restricted stock	2						$ 2					2
Issuance of common stock related to vesting of restricted stock (in shares)							32,000
Stock-based compensation	1,963								1,963			1,963
Ending balance at Jun. 30, 2017	66,216						$ 23		3,293,683		(3,227,480)	66,226		(10)
Ending balance (in shares) at Jun. 30, 2017							23,200,000
Net income (loss)	(11,506)										(11,067)	(11,067)		(439)
Acquisition						$ 671												$ 671
Issuance of common stock in exchange for cancelling warrants		$ 207						$ 0		$ 207			$ 207
Issuance of common stock share exchange for cancelling warrants (in shares)								55,000
Issuance of common stock related to warrants exercise	4,572						$ 1		4,571			4,572
Issuance of common stock shares related to warrants exercise (in shares)							1,266,000
Issuance of common stock related to vesting of restricted stock	$ 1						$ 1					1
Issuance of common stock related to vesting of restricted stock (in shares)							198,000
Issuance of common stock related to stock options exercise, Shares	0
Stock-based compensation	$ 4,425								4,425			4,425
Ending balance at Jun. 30, 2018	$ 64,586						$ 25		3,302,886		(3,238,547)	64,364		222
Ending balance (in shares) at Jun. 30, 2018	24,718,395						24,719,000
Net income (loss)	$ (3,079)										(2,908)	(2,908)		(171)
Net Income (Loss), Contingently redeemable non-controlling interest	(53)
Adoption of accounting standard (Note 2)	(2,919)										(2,919)	(2,919)
Acquisition			$ 333		$ 3,632										$ 333		$ 3,632
Acquisition, Contingently redeemable non-controlling interest			$ 333		$ 3,632
Issuance of common stock related to warrants exercise	1,409						$ 0		1,409			1,409
Issuance of common stock shares related to warrants exercise (in shares)							420,000
Issuance of common stock related to vesting of restricted stock	0						$ 0		0			0
Issuance of common stock related to vesting of restricted stock (in shares)							171,000
Issuance of common stock related to stock options exercise	$ 142						$ 0		142			142
Issuance of common stock related to stock options exercise, Shares	44,000						44,000
Stock-based compensation	$ 978								978			978
Ending balance at Jun. 30, 2019	$ 65,082						$ 25		$ 3,305,415		$ (3,244,374)	$ 61,066		$ 4,016
Ending balance (in shares) at Jun. 30, 2019	25,352,989						25,353,000
Ending balance, Contingently redeemable non-controlling interest at Jun. 30, 2019	$ 3,912

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Summary of Significant Accounting Policies - Estimated Useful Lives of Property, Equipment and Real Estate Assets (Details)	12 Months Ended
	Jun. 30, 2019
Buildings
Property Plant And Equipment [Line Items]
Estimated useful lives	55 years
Site Improvements
Property Plant And Equipment [Line Items]
Estimated useful lives	16 years
Tenant Improvements
Property Plant And Equipment [Line Items]
Estimated useful lives	12 years
Leasehold Improvements
Property Plant And Equipment [Line Items]
Estimated useful lives	lesser of 7 years or life of the lease
Leasehold Improvements | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	7 years
Furniture and Fixtures | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives	1 year
Furniture and Fixtures | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	5 years
Medical Equipment for Lease | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives	1 year
Medical Equipment for Lease | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	5 years
Vehicles
Property Plant And Equipment [Line Items]
Estimated useful lives	5 years
Sleep Study Equipment
Property Plant And Equipment [Line Items]
Estimated useful lives	5 years
Computer Equipment And Software
Property Plant And Equipment [Line Items]
Estimated useful lives	3 years

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Income Taxes - Federal Net Operating Loss Carryforwards (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Operating Loss Carryforwards
Federal net operating loss carryforwards	$ 1,625,760
2020
Operating Loss Carryforwards
Federal net operating loss carryforwards	174,877
2021
Operating Loss Carryforwards
Federal net operating loss carryforwards	504,561
2022
Operating Loss Carryforwards
Federal net operating loss carryforwards	143,137
2023
Operating Loss Carryforwards
Federal net operating loss carryforwards	131,077
2024
Operating Loss Carryforwards
Federal net operating loss carryforwards	60,132
2025 through 2037
Operating Loss Carryforwards
Federal net operating loss carryforwards	603,819
Indefinite
Operating Loss Carryforwards
Federal net operating loss carryforwards	$ 8,157

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Non-Controlling Interests and Preferred Stock of Subsidiary - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions		1 Months Ended	3 Months Ended	12 Months Ended
	Sep. 07, 2018	Jan. 31, 2019	Sep. 30, 2017	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Minority Interest [Line Items]
Preferred stock, par value				$ 0.001		$ 0.001
Preferred stock, shares outstanding				0		0
GE FM Holdings
Minority Interest [Line Items]
Percentage of ownership interest issued to former owner/holder							19.90%
DME Holdings
Minority Interest [Line Items]
Preferred stock, shares issued	5,266
Preferred stock, par value	$ 1,000
Preferred stock, dividend rate, percentage	10.00%
Preferred stock, dividend payment terms				semi-annually
Preferred stock, redemption price per share	$ 1,000
Preferred stock, additional shares redeemed				3,552	1,500
Preferred stock, cancelled and forfeited shares		214
Preferred stock, shares outstanding				0
DME Holdings | Minimum
Minority Interest [Line Items]
Preferred stock capitalization percentage net of debt				125.00%
DME, Inc.
Minority Interest [Line Items]
Percentage of common stock equity ownership issued				9.95%
Description of non-controlling interest in subsidiaries upon seventh anniversary of issuance date				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.
Percentage of common stock equity ownership issued				9.95%
GECC GP Corp.
Minority Interest [Line Items]
Stock-based compensation expense			$ 1.5

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Lessor Operating Leases - Summary of Base Rents for Remaining Lease Term (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Lessor Disclosure [Abstract]
For the year ending June 30, 2020	$ 4,120
For the year ending June 30, 2021	4,213
For the year ending June 30, 2022	4,312
For the year ending June 30, 2023	4,419
For the year ending June 30, 2024	4,529
Thereafter	28,673
Total base rent	$ 50,266

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Fixed Assets - Summary of Fixed Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Property Plant And Equipment [Line Items]
Real Estate Assets, Gross Carrying Amount	$ 56,025	$ 56,025
Accumulated depreciation	(1,614)	(384)
Net carrying amount	54,411	55,641
Property and Equipment, Gross Carrying Amount	1,763	72
Accumulated depreciation	(396)	(31)
Net carrying amount	1,367	41
Medical equipment held for rental	13,294
Accumulated depreciation	(4,154)
Net carrying amount	9,140
Buildings
Property Plant And Equipment [Line Items]
Real Estate Assets, Gross Carrying Amount	43,355	43,355
Land and Site Improvements
Property Plant And Equipment [Line Items]
Real Estate Assets, Gross Carrying Amount	9,170	9,170
Tenant Improvements
Property Plant And Equipment [Line Items]
Real Estate Assets, Gross Carrying Amount	3,500	3,500
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and Equipment, Gross Carrying Amount	774	45
Vehicles
Property Plant And Equipment [Line Items]
Property and Equipment, Gross Carrying Amount	239
Computer Equipment And Software
Property Plant And Equipment [Line Items]
Property and Equipment, Gross Carrying Amount	187
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Property and Equipment, Gross Carrying Amount	331	$ 27
Sleep Study Equipment
Property Plant And Equipment [Line Items]
Property and Equipment, Gross Carrying Amount	$ 232

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Stockholders' Equity - Non-Controlling Interest - Additional Information (Details) $ in Millions	12 Months Ended
	Jun. 30, 2018 USD ($)
GP Corp.
Stockholders' Equity
Stock-based compensation expense	$ 1.5

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Segment Information - Schedule of Assets by Segment (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Fixed assets, net	$ 64,918	$ 55,682
Identifiable intangible assets, net	17,576	9,400
Goodwill	50,397
Other assets	49,835	68,505
Total assets	182,726	133,587
Durable Medical Equipment
Segment Reporting Information [Line Items]
Fixed assets, net	10,464
Identifiable intangible assets, net	9,297
Goodwill	50,397
Other assets	17,300
Total assets	87,458
Investment Management
Segment Reporting Information [Line Items]
Fixed assets, net	43	41
Identifiable intangible assets, net	2,910	3,531
Other assets	3,065	5,878
Total assets	6,018	9,450
Real Estate
Segment Reporting Information [Line Items]
Fixed assets, net	54,411	55,641
Identifiable intangible assets, net	5,369	5,869
Other assets	1,534	937
Total assets	61,314	62,447
General Corporate
Segment Reporting Information [Line Items]
Other assets	27,936	61,690
Total assets	$ 27,936	$ 61,690

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Acquisitions - Summary of Acquisition Cost and Allocation to Assets Acquired and Liabilities Assumed on Date of Acquisition (Details) - CRIC IT Fort Myers LLC $ in Thousands	1 Months Ended
	Mar. 31, 2018 USD ($)
Business Acquisition [Line Items]
Cash consideration	$ 2,700
Cash and restricted cash acquired	(606)
Transaction costs	261
Total consideration, net of cash and restricted cash acquired	2,355
Buildings	43,355
Land and site improvements	9,170
In-place lease intangible asset	6,028
Tenant improvements	3,500
Other assets	253
Senior note payable assumed	(52,227)
Subordinated note payable assumed	(5,789)
Deferred tax liability	(478)
Other liabilities assumed	(786)
Non-controlling interests	(671)
Net Assets Acquired	$ 2,355

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Acquisitions - Additional Information (Details)			1 Months Ended		12 Months Ended
		Sep. 07, 2018 USD ($)	Jun. 30, 2019 USD ($) Property	Mar. 31, 2018 USD ($) a Property	Jun. 30, 2019 USD ($) Property	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
Business Acquisition [Line Items]
Maximum additional consideration payable		$ 2,400,000
Goodwill			$ 50,397,000		$ 50,397,000
Income tax benefit, reduction of valuation allowance					5,788,000	$ 248,923,000	$ (6,230,000)
Acquisition costs	[1]				2,133,000
Costs associated with issuing debt			500,000		500,000
Non-controlling interests			$ 4,016,000		$ 4,016,000	222,000
Gartner I and Gartner II
Business Acquisition [Line Items]
Number of office buildings | Property			2		2
General and Administrative Expense
Business Acquisition [Line Items]
Acquisition costs					$ 2,100,000
DME, Inc.
Business Acquisition [Line Items]
Non-controlling interest in acquired companies, percentage		19.90%
CRIC IT Fort Myers LLC
Business Acquisition [Line Items]
Non-controlling interest in acquired companies, percentage				19.90%
Monte Carlo Simulation Model | Weighted Average Cost of Capital
Business Acquisition [Line Items]
Contingent consideration, fair value estimation, volatility		14	12		12
Monte Carlo Simulation Model | Volatility
Business Acquisition [Line Items]
Contingent consideration, fair value estimation, volatility		33.5	27.4		27.4
DME Holdings
Business Acquisition [Line Items]
Preferred stock cancelled and forfeited					$ 200,000
DME, Inc.
Business Acquisition [Line Items]
Percentage of voting interests acquired		80.10%
Intangible assets, fair value			$ 10,100,000		10,100,000
Maximum additional consideration payable		$ 2,400,000	2,100,000		2,100,000
Contingent consideration fair value		1,000,000	1,100,000		1,100,000
Goodwill		44,741,000	44,700,000		44,700,000
Goodwill expected to be deductible for income tax purposes			29,400,000		29,400,000
Estimated fair value of non-controlling interest in acquired business		7,265,000
Deferred tax liabilities		1,160,000
Income tax benefit, reduction of valuation allowance						900,000
Contingent consideration fair value		57,069,000
Purchase price in cash		$ 25,321,000
DME, Inc. | Monte Carlo Simulation Model | Weighted Average Cost of Capital
Business Acquisition [Line Items]
Contingent consideration, fair value estimation, volatility		14
DME, Inc. | Monte Carlo Simulation Model | Volatility
Business Acquisition [Line Items]
Contingent consideration, fair value estimation, volatility		33.5
DME, Inc. | Trade Name
Business Acquisition [Line Items]
Intangible assets, fair value		$ 8,800,000	8,800,000		$ 8,800,000
Intangible assets, fair value assumptions, royalty rate		3.00%
Intangible assets, fair value assumptions, discount rate		14.00%
Expected life					10 years
DME, Inc. | Non-compete Agreements
Business Acquisition [Line Items]
Intangible assets, fair value		$ 1,260,000	1,300,000		$ 1,300,000
Intangible assets, fair value assumptions, discount rate		14.00%
Weighted-average expected life					4 years 2 months 12 days
Midwest Respiratory Care, Inc.
Business Acquisition [Line Items]
Intangible assets, fair value			180,000		$ 180,000
Goodwill			5,656,000		5,656,000
Goodwill expected to be deductible for income tax purposes			0		0
Contingent consideration fair value			6,300,000
Revenue of combined acquired durable medical equipment business from the date of acquisition					41,900,000
Net loss of combined acquired durable medical equipment business from the date of acquisition					1,100,000
Midwest Respiratory Care, Inc. | DME, Inc.
Business Acquisition [Line Items]
Contingent consideration fair value			700,000
Midwest Respiratory Care, Inc. | Corbel Facility
Business Acquisition [Line Items]
Contingent consideration fair value			3,400,000
Midwest Respiratory Care, Inc. | Non-compete Agreements
Business Acquisition [Line Items]
Intangible assets, fair value			$ 200,000		$ 200,000
Intangible assets, fair value assumptions, discount rate			27.00%
Weighted-average expected life			5 years
CRIC IT Fort Myers LLC
Business Acquisition [Line Items]
Percentage of voting interests acquired				80.10%
Estimated fair value of non-controlling interest in acquired business				$ 671,000
Deferred tax liabilities				478,000
Income tax benefit, reduction of valuation allowance						$ 300,000
Purchase price in cash				2,700,000
Business Acquisition, Transaction Costs				261,000
Non-controlling interests				700,000
Senior and subordinated notes payable				$ 58,000,000
Business acquisition, percentage of transaction fee						7.00%
CRIC IT Fort Myers LLC | Gartner I and Gartner II | Fort Myers, FL
Business Acquisition [Line Items]
Number of office buildings | Property				2
Area of real estate Property | a				17

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

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Summary of Significant Accounting Policies - Impact of Cumulative Effect of Accounting Changes on Condensed Consolidated Balance Sheet (Details) - USD ($)	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2018
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Incentive fees receivable - related party			$ 2,919,000
Accumulated deficit	$ (3,244,374,000)		$ (3,238,547,000)
Topic 606
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Incentive fees receivable - related party		$ 0
Accumulated deficit		(3,241,466,000)
Impact of accounting change | Topic 606
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Incentive fees receivable - related party		(2,919,000)
Accumulated deficit		$ (2,919,000)

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Borrowings - Schedule of Aggregate Future Required Principal Debt Repayments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Debt Instrument [Line Items]
For the year ending June 30, 2020	$ 5,596
For the year ending June 30, 2021	11,276
For the year ending June 30, 2022	4,048
For the year ending June 30, 2023	4,195
For the year ending June 30, 2024	24,246
Thereafter	58,677
Total	108,038
Future interest to be paid-in-kind	12,992
Related Party Borrowings Subsidiaries
Debt Instrument [Line Items]
Outstanding principal	30,732	$ 3,224
Subsidiaries Other Outstanding Borrowings
Debt Instrument [Line Items]
Outstanding principal	$ 64,314	$ 56,984

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Goodwill and Other Intangible Assets - Schedule of Changes in Carrying Value of Goodwill (Details) $ in Thousands	12 Months Ended
	Jun. 30, 2019 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Acquisitions	$ 50,397
Ending Balance	$ 50,397

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Lessee Operating Leases - Additional Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Lessee Lease Description [Line Items]
Total right of use assets	$ 6,239	$ 1,521
Lease liabilities	6,533
Current portion of lease liabilities	1,423	336
Lease liabilities, net of current portion	$ 5,110	1,304
Lessee, operating lease term	88 months
Lessee, operating leases optional lease extension period	60 months
Existence of option to extend operating lease	true
Increase in average rate of lease payment	2.40%
Facilities
Lessee Lease Description [Line Items]
Total right of use assets	$ 6,066	1,521
Lease liabilities	6,360	1,640
Current portion of lease liabilities	1,371	336
Lease liabilities, net of current portion	$ 4,989	$ 1,304
Existence of option to extend operating lease	true
Vehicles
Lessee Lease Description [Line Items]
Total right of use assets	$ 80
Lease liabilities	80
Current portion of lease liabilities	18
Lease liabilities, net of current portion	$ 62
Vehicles | DME, Inc.
Lessee Lease Description [Line Items]
Lessee, operating lease term	60 months
Lessee, termination description	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.
Existence of option to terminate operating lease	false
Equipment
Lessee Lease Description [Line Items]
Total right of use assets	$ 93
Lease liabilities	93
Current portion of lease liabilities	34
Lease liabilities, net of current portion	59
Minimum
Lessee Lease Description [Line Items]
Increase in average rate of lease payment, value	$ 28
Minimum | Facilities
Lessee Lease Description [Line Items]
Lessee, operating lease term	60 months
Lessee operating lease remaining lease term	3 months
Minimum | Equipment
Lessee Lease Description [Line Items]
Lessee, operating lease term	36 months
Maximum
Lessee Lease Description [Line Items]
Increase in average rate of lease payment, value	$ 32
Maximum | Facilities
Lessee Lease Description [Line Items]
Lessee, operating lease term	183 months
Lessee, operating leases optional lease extension period	180 months
Lessee operating lease remaining lease term	96 months
Maximum | Equipment
Lessee Lease Description [Line Items]
Lessee, operating lease term	48 months

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Subsequent Events - Additional Information (Details) $ in Millions	Jul. 01, 2019 USD ($)
Arizona Hospice Operations | Subsequent Event | Durable Medical Equipment
Subsequent Event [Line Items]
Consideration for disposition of business	$ 0.5

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Stockholders' Equity - Stock Plans - Additional Information (Details) - shares	1 Months Ended
	Nov. 30, 2013	Jun. 30, 2019
Directors Stock Plan
Share-based Compensation Arrangement by Share-based Payment Award
Term of stock option grants	10 years
Common stock, shares outstanding		2,000
Directors Stock Plan | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	1 year
Directors Stock Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	3 years
Options acceleration period	24 months
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award
Term of stock option grants	10 years
Common stock, shares outstanding		214,685
Reduction in Share Reserve	1
Cliff period of options for new employees	1 year
2006 Plan | Full Value Stock Award
Share-based Compensation Arrangement by Share-based Payment Award
Reduction in Share Reserve	1.5
2006 Plan | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	3 years
2006 Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	4 years
2016 Long-Term Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award
Common stock, shares outstanding		3,221,668
2016 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award
Common stock, shares outstanding		0

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Goodwill and Other Intangible Assets

12 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

9. Goodwill and Other Intangible Assets

The Company’s investment management and real estate segments include identifiable intangible assets acquired through acquisitions in 2016 and 2018, respectively.  In connection with the acquisition of the durable medical equipment businesses and the subsequent acquisition of Midwest, the Company has also recognized goodwill and identifiable intangible assets associated with the tradenames and non-compete agreements.  See Note 4 – Acquisitions.  Intangible assets are amortized using applicable discounted cash flow attribution and straight-line methods over their useful lives.

Goodwill of $50.4 million presented on the 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.  See Note 4 – Acquisitions for additional details.  There was no goodwill as of June 30, 2018.

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

(in thousands)
Balance, June 30, 2018	$	-
Acquisitions		50,397
Balance, June 30, 2019		50,397

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

	As of June 30, 2019							As of June 30, 2018
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Durable Medical Equipment
Tradename	$	8,800	$	(733	)	$	8,067	$	-	$	-		$	-
Non-compete agreements		1,440		(210	)		1,230		-		-			-
		10,240		(943	)		9,297		-		-			-
Investment Management
Investment management agreement		3,900		(1,336	)		2,564		3,900		(789	)		3,111
Assembled workforce		526		(180	)		346		526		(106	)		420
		4,426		(1,516	)		2,910		4,426		(895	)		3,531
Real Estate
In-place lease		6,028		(659	)		5,369		6,028		(159	)		5,869
Total	$	20,694	$	(3,118	)	$	17,576	$	10,454	$	(1,054	)	$	9,400

Aggregate Amortization Expense (in thousands):
For the year ended June 30, 2019	$	2,063
For the year ended June 30, 2018		730
For the year ended June 30, 2017		324

Estimated Future Amortization Expense (in thousands):
For the year ending June 30, 2020	$	2,335
For the year ending June 30, 2021		2,187
For the year ending June 30, 2022		2,028
For the year ending June 30, 2023		1,887
For the year ending June 30, 2024		1,701

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Related Party Transactions

12 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

5. Related Party Transactions

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.

Durable Medical Equipment

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 Capital Partners SBIC, L.P. (Corbel) (the Corbel Facility).  Jeffrey S. Serota, a member of the Company’s Board of Directors, serves as Vice Chairman to Corbel Capital Partners.  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, 2019 Corbel received preferred stock of DME Holdings and a non-controlling interest in DME Inc.  Pursuant to the Corbel Facility, Corbel was paid a structuring fee, will be paid an ongoing quarterly monitoring fee, and may be paid a deferred structuring fee if the loans are subject to early repayment.  See Note 11 - Borrowings for additional information on the Corbel Facility and Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

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.  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.  Additionally, the Company has a contingent liability to the sellers for $1.1 million, which is included in the current portion of related party payables on the balance sheet.  During the year ended June 30, 2019, the Company made payments of $0.3 million to the sellers as part of the contingent consideration.  See Note 8 – Fair Value Measurements for additional details.

As a result of measurement period adjustments to the net working capital discussed in Note 4 – Acquisitions, $0.2 million in shares of preferred stock in DME Holdings were cancelled and forfeited and the remaining difference between the adjustment and the value of the preferred stock cancelled and forfeited was paid by the sellers to DME Holdings.  During the year ended June 30, 2019, the Company redeemed $5.1 million in shares of preferred stock in DME Holdings from Corbel.

Investment Management

The Company’s wholly-owned subsidiary, GECM, has agreements to provide administrative services and manage the investment portfolio for GECC.  Under these agreements, GECM receives administrative fees, management fees based on GECC’s assets (other than cash and cash equivalents) and incentive fees if GECC has net capital gains or if its net investment income exceeds a specified hurdle rate.  Fees under the agreements began to accrue on November 4, 2016.  See Note 3 – Revenue for additional discussions of the fee arrangements.

All of the Company’s investment management revenue recognized for the periods presented was generated from the management and administration of GECC.  Additionally, the Company receives dividends from its investment in GECC and earns unrealized profits and losses based on the mark-to-market performance of GECC.  See Note 8 – Fair Value Measurements.

The following tables summarize activity and outstanding balances between GECC and the Company.

	For the years ended June 30,
(in thousands)	2019			2018			2017
Change in unrealized gain (loss) on investment in GECC    recorded in the period	$	(1,062	)	$	(2,714	)	$	(9,114	)
GECC dividends recorded in the period		2,431			2,352			1,306

	As of As of June 30,
(in thousands)	2019		2018
Dividends receivable from GECC	$	206	$	163
Investment management revenues receivable from GECC(1)		1,124		4,094

(1) Investment management fees receivable from GECC as of June 30, 2018 include incentive fee receivables of $2.9 million which have been reversed as a result of the adoption of Topic 606 on July 1, 2018.  See Note 2 – Summary of Significant Accounting Policies.

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

The Company owns approximately 19.5% 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.  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.

GECM has a profit sharing agreement with the Company’s majority-owned subsidiary GECC GP Corp. (Profit Sharing Agreement).  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 June 30, 2019; correspondingly, no profits were available to GECC GP Corp. under the profit sharing agreement.  Certain employees of the Company have a non-controlling interest in GECC GP Corp.  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

The Company’s wholly-owned subsidiary, Great Elm Opportunities GP, Inc. (GEOGP) serves as the general partner of Great Elm Opportunities Fund I, LP (GEOF).  As the general partner, GEOGP provides administrative services and manages the investment portfolio of GEOF.  Based on the performance of GEOF’s investment portfolio, GEOGP may be entitled to certain incentive allocations.  GEOF began investing in July 2018 and through June 30, 2019 no incentive allocations have been made to GEOGP.

As part of the entry into the investment management business in November 2016, the Company entered into a cost sharing agreement with MAST Capital Management, LLC (MAST Capital) and acquired certain assets from MAST Capital.  In consideration for the assets acquired, GECC GP Corp. issued a senior secured note payable (GP Corp. Note).  In addition, the Company issued warrants to purchase 54,733 shares of the Company’s common stock (MAST Warrants).  During the year ended June 30, 2018 the Company paid $0.4 million in non-reimbursable expenses in connection with the cost sharing agreement.  There was no such activity for the year ended June 30, 2019 as a result of the separation discussed below.

In September 2017, the Company entered into a separation agreement with MAST.  The separation agreement contemplated, among other things, a reduction in the principal balance of the GP Corp. Note, the termination of the cost sharing agreement and the exchange of the MAST warrants for new warrants to purchase 420,000 shares of the Company’s common stock (New MAST Warrants).  As a result of the separation, $0.5 million of non-vested stock-based compensation was forfeited.  In July 2018, MAST Capital exercised the New MAST Warrants.  MAST Capital is the beneficial owner of approximately 7.9% of the Company’s outstanding common stock as of June 30, 2019.  See Note 11 - Borrowings for additional discussion of the GP Corp. Note and Note 13 – Stockholders’ Equity for additional discussion of the warrant activity.

Prior to the September 2017 separation, certain MAST Capital employees were also employees of GECM.  In accordance with the terms of the cost sharing agreement, employee and other operating costs incurred with the Company’s investment management business are based on direct management of each company’s investment portfolio or correlated to percentages of assets under management.  For the year ended June 30, 2018, the Company incurred $0.4 million of non-reimbursable expenses under the cost sharing agreement prior to the separation, of which $0.3 million is included in investment management expenses and $0.1 million is included in selling, general and administrative expense on the statement of operations.  For the year ended June 30, 2017, $1.8 million of investment management expenses included in the statement of operations were charged to MAST Capital.

Real Estate

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. (GE FM Holdings).  See Note 13 – Non-Controlling Interests and Preferred Stock of Subsidiary.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Jun. 30, 2019

Estimated Useful Lives of Property, Equipment, Real Estate Assets and Rental Equipment

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

Description	Life in Years
Real Estate Assets
Buildings	55
Site improvements	16
Tenant improvements	12
Property and Equipment
Leasehold improvements	lesser of 7 years or life of the lease
Vehicles	5
Sleep study equipment	5
Furniture and fixtures	1 to 5
Computer equipment and software	3
Rental Equipment
Medical equipment for lease	1 to 5

Earnings Per Share, Basic and Diluted

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

	For the years ended June 30,
	2019			2018			2017
Loss from continuing operations	$	(6,868	)	$	(11,341	)	$	(17,440	)
Income (loss) from discontinued operations, net of tax		3,736			(165	)		2,203
Net income (loss)	$	(3,132	)	$	(11,506	)	$	(15,237	)
Less: net loss attributable to non-controlling interest		(224	)		(439	)		(30	)
Net income (loss) attributable to Great Elm Capital Group	$	(2,908	)	$	(11,067	)	$	(15,207	)
Weighted average shares basic and diluted:
Weighted average shares of common stock outstanding		25,210			24,277			16,433
Weighted average shares used in computing income (loss) per share		25,210			24,277			16,433
Basic and diluted income (loss) per share from:
Income (loss) from continuing operations	$	(0.26	)	$	(0.45	)	$	(1.06	)
Income (loss) from discontinued operations		0.15			(0.01	)		0.13
Net income (loss)	$	(0.11	)	$	(0.46	)	$	(0.93	)

Topic 606

Impact of Cumulative Effect of Accounting Changes on Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Operations

The following table reflects the impact of the cumulative effect of the accounting changes upon the adoption of Topic 606 on the consolidated balance sheet as of the beginning of the period:

(in thousands)	As of June 30, 2018			Impact of accounting change			As of July 1, 2018
Incentive fees receivable - related party	$	2,919		$	(2,919	)	$	-
Accumulated deficit		(3,238,547	)		(2,919	)		(3,241,466	)

The following table shows the effect of the change in accounting on the consolidated statement of operations:

	For the year ended June 30, 2019
(in thousands)	Under Topic 605			Under Topic 606			Effect of Change
Investment management revenues	$	6,975		$	3,841		$	3,134
Durable medical equipment sales and services revenue		27,298			27,298			-
Total revenues accounted for under Topic 606	$	34,273		$	31,139		$	3,134
Total revenues		54,314			51,180			3,134
Net income (loss) from continuing operations		(3,734	)		(6,868	)		3,134
Net income (loss)		2			(3,132	)		3,134
Net income (loss) attributable to Great Elm Capital Group		226			(2,908	)		3,134
Basic and diluted net income (loss) per share	$	0.01		$	(0.11	)	$	0.12

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Fixed Assets (Tables)

12 Months Ended

Jun. 30, 2019

Property Plant And Equipment [Abstract]

Summary of Fixed Assets

The following tables detail the Company’s fixed assets:

(in thousands)	June 30, 2019			June 30, 2018
Real Estate Assets
Buildings	$	43,355		$	43,355
Land and site improvements		9,170			9,170
Tenant improvements		3,500			3,500
		56,025			56,025
Accumulated depreciation		(1,614	)		(384	)
Net carrying amount	$	54,411		$	55,641
Property and Equipment
Leasehold improvements	$	774		$	45
Vehicles		239			-
Computer equipment and software		187			-
Furniture and fixtures		331			27
Sleep study equipment		232			-
		1,763			72
Accumulated depreciation		(396	)		(31	)
Net carrying amount	$	1,367		$	41
Medical Equipment Held for Rental
Medical equipment held for rental	$	13,294		$	-
Accumulated depreciation		(4,154	)		-
Net carrying amount	$	9,140		$	-

Summary of Reconciles Depreciation Expense

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)	2019		2018		2017
Depreciation and amortization	$	1,619	$	1,124	$	340
Cost of durable medical equipment rentals		5,550		-		-
Total depreciation expense	$	7,169	$	1,124	$	340

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Lessee Operating Leases (Tables)

12 Months Ended

Jun. 30, 2019

Lessee Disclosure [Abstract]

Schedule of Additional Details of Lease Presented in Balance Sheet

The following table provides additional details of the leases presented in the balance sheets:

(in thousands)	June 30, 2019			June 30, 2018
Facilities
Right of use assets	$	6,066		$	1,521
Current portion of lease liabilities		1,371			336
Lease liabilities, net of current portion		4,989			1,304
Total liabilities	$	6,360		$	1,640
Weighted-average remaining life	4.4 years			6.3 years
Weighted-average discount rate		11.7	%		10.0	%
Vehicles
Right of use assets	$	80		$	-
Current portion of lease liabilities		18			-
Lease liabilities, net of current portion		62			-
Total liabilities	$	80		$	-
Weighted-average remaining life	3.7 years			n/a
Weighted-average discount rate		12.3	%	n/a
Equipment
Right of use assets	$	93		$	-
Current portion of lease liabilities		34			-
Lease liabilities, net of current portion		59			-
Total liabilities	$	93		$	-
Weighted-average remaining life	2.6 years			n/a
Weighted-average discount rate		12.5	%	n/a

Schedule of Operating Lease Cost

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)	2019		2018		2017
Facilities
Operating lease cost	$	1,777	$	353	$	723
Cash paid for operating leases		1,720		920		786
Vehicles
Operating lease cost	$	23	$	-	$	-
Cash paid for operating leases		23		-		-
Equipment
Operating lease cost	$	31	$	-	$	-
Cash paid for operating leases		31		-		-

Schedule of Company's Undiscounted Cash Payment Obligations for Operating Lease

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

(in thousands)
For the year ending June 30, 2020	$	2,090
For the year ending June 30, 2021		2,027
For the year ending June 30, 2022		1,772
For the year ending June 30, 2023		1,135
For the year ending June 30, 2024		781
Thereafter		549
Total lease payments	$	8,354
Imputed interest		(1,821	)
Total lease liabilities	$	6,533