On December 29, 2022, in connection with the Stock Purchase Agreement and Stockholders Agreement, each defined below, GEG and FM Acquisition issued a promissory note in favor of Forest in an aggregate principal amount equal to $38.1 million (the Forest Note), in exchange for the transfer to FM Acquisition of $3.3 million of Series A-1 preferred interests and $34.0 million of Series A-2 preferred interests held by Forest in HC LLC plus, in each case, accrued dividends thereon to the date of transfer. The Forest Note had a maturity date of March 1, 2023 and bore interest at a fixed rate of 9% per annum.

On December 30, 2022, in connection with the Transactions with JPM, as defined below, the Company partially repaid the Forest Note in the amount of $18.4 million. As of December 31, 2022, the remaining balance, inclusive of accrued interest, due to Forest under the Forest Note was $19.7 million, which was subsequently paid in full on January 3, 2023 using the proceeds from the Sale of HC LLC (see Note 4 - Assets and Liabilities Held for Sale and Discontinued Operations).

During the three and nine months ended March 31, 2023, the Company recorded interest expense of approximately $10 thousand and $19 thousand, respectively, with respect to the Forest Note.

On December 30, 2022, GEG and FM Acquisition, entered into a stock purchase agreement (the Stock Purchase Agreement) with J.P. Morgan Broker-Dealer Holdings Inc. (JPM) to sell 61 shares of the common stock, $0.001 par value per share, of Forest owned by FM Acquisition and GEG, which constitute 61% of the issued and outstanding shares of Forest’s common stock, to JPM for approximately $18.4 million in cash (the Sale of Controlling Interest in Forest). Upon execution of the Stock Purchase Agreement, the Company deconsolidated Forest and recognized an investment in respect to its retained 19% non-controlling interest in Forest (the Investment in Forest) in the amount of $2.1 million. The following table shows calculation of the recorded gain on sale of controlling interest in subsidiary of $10.5 million on the Company's condensed consolidated statement of operations for the nine months ended March 31, 2023:


(in thousands)	December 30, 2022
Cash proceeds	$	18,409
Fair value of retained 19% non-controlling interest in Forest		2,128
Carrying value of non-controlling interest prior to sale		2,120
		22,657
Less: Carrying value of net assets disposed		12,133
Gain on Sale of Controlling Interest in Forest	$	10,524

The Investment in Forest was determined to be an equity security measured at fair value within Level 3 of the fair value hierarchy. As a result of Forest joining the JPM consolidated group, we recognized an unrealized gain on our Investment in Forest of $24.4 million during the three and six months ended December 31, 2022 within net realized and unrealized gain (loss) on investments on the consolidated statements of operations.

The Sale of Controlling Interest in Forest did not meet the criteria for presentation as discontinued operations. The following table shows loss before income taxes of Forest, as well as loss before income taxes of Forest attributable to Great Elm Group, Inc.:


	For the three months ended March 31,					For the nine months ended March 31,
(in thousands)	2023		2022			2023			2022
Loss before income taxes		-		(482	)		(2,679	)		(1,442	)
Loss before income taxes attributable to Great Elm Group, Inc.		-		(1,726	)		(1,133	)		(2,508	)

In connection with the Stock Purchase Agreement, GEG, JPM and Forest entered into an amended and restated stockholders’ agreement (the Stockholders Agreement). Pursuant to the Stockholders Agreement, from January 17, 2023 until February 17, 2023, GEG had the right (the Put Option, together with the Sale of Controlling Interest in Forest referred to as the Transactions with JPM) to sell the Investment in Forest for the then fair market value. On January 17, 2023, the Company exercised the Put Option and sold the Investment in Forest for $26.5 million in cash, resulting in the total realized gain on our Investment in Forest for three and nine months ended March 31, 2023 of $24.4 million recorded within net realized and unrealized gain (loss) on investments on the consolidated statements of operations.