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Stockholders' Equity
12 Months Ended
Jun. 30, 2022
Equity [Abstract]  
Stockholders' Equity
17.
Stockholders' Equity

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, 2022, the Company had no shares outstanding under the Directors’ Plan.

In June 2016, the Company’s stockholders approved the Great Elm Group, Inc. 2016 Long-Term Incentive Plan (the 2016 Long-Term Incentive Plan) and the Great Elm Group, Inc. 2016 Employee Stock Purchase Plan (the 2016 Employee Stock Purchase Plan). In October 2018, the Company’s stockholders approved amendments to the 2016 Long-Term Incentive Plan. In November 2021, the Company’s stockholders approved an increase to the number of shares available for issuance under the Long-Term Incentive Plan. As of June 30, 2022, the Company had a total of 3,446,728 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 available for future issuance under the plans discussed above as of June 30, 2022:

Shares of Common Stock Available for Future Issuance

 

Directors' Plan

 

 

26,166

 

2016 Long-Term Incentive Plan

 

 

1,268,819

 

2016 Employee Stock Purchase Plan

 

 

944,000

 

Total

 

 

2,238,985

 

 

Non-Employee Director Deferred Compensation Plan

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

Restricted Stock Awards and Restricted Stock Units

In November 2021, the Compensation Committee of the Board of Directors (the Compensation Committee) in its discretion determined that an aggregate of 580,023 performance shares previously awarded to certain employees had vested. These restricted stock awards granted had both performance and service requirements in connection with the formation of the investment management business. The vesting of these awards was 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. The discretionary vesting of shares, as determined by the Compensation Committee resulted in a charge to stock-based compensation expense of $0.6 million during the year ended June 30, 2022.

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

Restricted stock units granted are subject to service requirements. The Company accounts for forfeitures of the restricted stock units in the period incurred. During the year ended June 30, 2022 the Company granted 148,139 shares of restricted stock units to employees and directors.

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

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

Restricted Stock Awards and Restricted Stock Units

 

Restricted Stock
(in thousands)

 

 

Weighted Average Grant Date Fair Value

 

Outstanding at June 30, 2021

 

 

904

 

 

$

3.76

 

Granted

 

 

1,673

 

 

 

1.83

 

Vested

 

 

(1,112

)

 

 

3.16

 

Forfeited

 

 

(153

)

 

 

3.87

 

Outstanding at June 30, 2022

 

 

1,312

 

 

$

1.79

 

Stock Options

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

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

 

 

For the years ended June 30,

 

 

 

2022

 

 

2021

 

Expected volatility

 

69.8% - 69.8%

 

 

63.8% - 66.5%

 

Expected dividends

 

 

-

 

 

 

-

 

Expected term (years)

 

3.25 - 3.25

 

 

3.25 - 3.25

 

Risk-free rate

 

60.30% - 60.30%

 

 

0.23% - 0.40%

 

 

The option activity for the year ended June 30, 2022 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, 2021

 

 

2,493

 

 

$

3.69

 

 

 

4.51

 

 

$

-

 

Options granted

 

 

18

 

 

 

2.87

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

Forfeited, cancelled or expired

 

 

(377

)

 

 

3.67

 

 

 

 

 

 

 

Outstanding at June 30, 2022

 

 

2,134

 

 

$

3.68

 

 

 

3.34

 

 

$

-

 

Exercisable at June 30, 2022

 

 

1,972

 

 

$

3.65

 

 

 

3.23

 

 

$

-

 

Vested and expected to vest as of June 30, 2022

 

 

2,134

 

 

$

3.68

 

 

 

3.34

 

 

$

-

 

The weighted average grant date fair value of options, per share, granted during the years ended June 30, 2022 and 2021 was $1.02 and $1.14, respectively. No options were exercised during the year ended June 30, 2022 or 2021.

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

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

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