Ridgepost Capital, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm 87 Consolidated Balance Sheets as of December 31, 2022 and 2021 88 Consolidated Statements of Operations for the Years ended December 31, 2022, 2021, and 2020 90 Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2022, 2021, and 2020 91 Consolidated Statements of Cash Flows for the Years ended December 31, 2022, 2021, and 2020 92 Notes to Consolidated Financial Statements 94 86 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors P10, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of P10, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP We have served as the Company’s auditor since 2017. Chicago, Illinois March 27, 2023 87 P10, Inc. Consolidated Balance Sheets (in thousands, except share amounts) As of As of December 31, December 31, 2022 2021 ASSETS Cash and cash equivalents $ 20,021 $ 40,916 Restricted cash 9,471 2,566 Accounts receivable 16,551 2,854 Note receivable 4,231 2,552 Due from related parties 36,538 12,357 Investment in unconsolidated subsidiaries 2,321 1,803 Prepaid expenses and other assets 5,089 4,759 Property and equipment, net 2,878 981 Right-of-use assets 15,923 14,789 Contingent payments to customers 13,629 — Deferred tax assets, net 41,275 45,151 Intangibles, net 151,795 128,788 Goodwill 506,638 418,701 Total assets $ 826,360 $ 676,217 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Accounts payable $ 2,578 $ 401 Accrued expenses 8,052 6,009 Accrued compensation and benefits 18,900 6,465 Due to related parties 2,157 2,258 Other liabilities 8,715 1,808 Contingent consideration 17,337 22,963 Accrued contingent liability 14,305 — Deferred revenues 12,651 12,953 Lease liabilities 18,558 15,700 Debt obligations 289,224 212,496 Total liabilities 392,477 281,053 STOCKHOLDERS' EQUITY: Class A common stock, $ 0.001 par value; 510,000,000 shares authorized; 43,303,040 issued and 42,365,266 outstanding as of December 31, 2022, and 34,464,920 issued and 34,464,920 outstanding as of December 31, 2021, respectively 42 34 Class B common stock, $ 0.001 par value; 180,000,000 shares authorized; 73,131,825 shares issued and 73,008,374 shares outstanding as of December 31, 2022, and 82,851,279 shares issued and 82,727,827 shares outstanding as of December 31, 2021, respectively 73 83 Treasury stock ( 9,926 ) ( 273 ) Additional paid-in-capital 628,828 650,405 Accumulated deficit ( 225,879 ) ( 255,085 ) Noncontrolling interest 40,745 — Total stockholders' equity 433,883 395,164 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 826,360 $ 676,217 88 The Notes to Consolidated Financial Statements are an integral part of these statements. P10, Inc. Consolidated VIE Balance Sheets (in thousands, except per share amounts) As of As of December 31, December 31, 2022 2021 ASSETS Cash and cash equivalents $ 12,654 $ 18,536 Restricted cash 756 756 Accounts receivable 3,264 1,060 Note receivable 808 2,552 Due from related parties 16,029 3,243 Prepaid expenses and other assets 3,823 1,330 Property and equipment, net 1,409 866 Right-of-use assets 15,081 4,976 Contingent payments to customers 13,629 - Intangibles, net 117,142 84,339 Goodwill 383,444 295,507 Total assets $ 568,039 $ 413,165 LIABILITIES Accounts payable $ 2,418 $ 121 Accrued expenses 16,690 4,818 Accrued compensation and benefits 14,191 4,326 Contingent consideration 17,337 22,963 Accrued contingent liability 14,305 - Deferred revenues 11,265 10,676 Lease liabilities 16,798 5,944 Deferred tax liabilities, net 3,316 4,769 Total liabilities $ 96,320 $ 53,617 89 The Notes to Consolidated Financial Statements are an integral part of these statements. P10, Inc. Consolidated Statements of Operations (in thousands, except per share amounts) For the Year Ended December 31, 2022 2021 2020 REVENUES Management and advisory fees $ 196,546 $ 149,424 $ 66,125 Other revenue 1,814 1,110 1,243 Total revenues 198,360 150,534 67,368 OPERATING EXPENSES Compensation and benefits 94,297 54,755 24,529 Professional fees 12,856 11,508 13,953 General, administrative and other 18,522 9,870 4,710 Contingent consideration expense 1,717 3,472 21 Amortization of intangibles 26,867 30,431 15,466 Strategic alliance expense 678 152 — Total operating expenses 154,937 110,188 58,679 INCOME FROM OPERATIONS 43,423 40,346 8,689 OTHER (EXPENSE)/INCOME Interest expense implied on notes payable to sellers — ( 825 ) ( 988 ) Interest expense, net ( 9,505 ) ( 21,360 ) ( 10,732 ) Loss on extinguishment of debt — ( 15,312 ) — Other income 1,545 848 — Total other (expense) ( 7,960 ) ( 36,649 ) ( 11,720 ) Net income before income taxes 35,463 3,697 ( 3,031 ) Income tax benefit/(expense) ( 6,064 ) 7,070 26,837 NET INCOME $ 29,399 $ 10,767 $ 23,806 Less: preferred dividends attributable to redeemable noncontrolling interest - ( 1,593 ) ( 720 ) Less: net income attributable to noncontrolling interest in P10 Intermediate ( 193 ) - - NET INCOME ATTRIBUTABLE TO P10 $ 29,206 $ 9,174 $ 23,086 Earnings per share Basic earnings per share $ 0.25 $ 0.13 $ 0.37 Diluted earnings per share $ 0.24 $ 0.08 $ 0.36 Dividends paid per share $ 0.09 $ — $ — Weighted average shares outstanding, basic 116,751 72,660 62,465 Weighted average shares outstanding, diluted 121,655 112,332 64,905 90 The Notes to Consolidated Financial Statements are an integral part of these statements. P10, Inc. Consolidated Statements of Changes in Stockholders’ Equity (in thousands) Common Stock Common Stock - Class A Common Stock - Class B Treasury stock Additional Accumulated Non Controlling Stockholders' Shares Amount Shares Amount Shares Amount Shares Amount Paid-in-capital Deficit Interst Equity Balance at December 31, 2019 62,464 63 — $ — — $ — 123 $ ( 273 ) $ 323,596 $ ( 287,345 ) $ — $ 36,041 Stock-based compensation — — — — — — — — 714 — — 714 Net income attributable to P10 — — — — — — — — — 23,086 — 23,086 Balance at December 31, 2020 62,464 63 — $ — — $ — 123 $ ( 273 ) $ 324,310 $ ( 264,259 ) $ — $ 59,841 Net income attributable to P10 — — — — — — — — — 9,174 — 9,174 Stock-based compensation — — — — — — — — 2,416 — — 2,416 Exchange of common stock and redeemable noncontrolling interest to Class B common stock ( 62,464 ) ( 63 ) — — 105,655 106 — — 197,676 — — 197,719 Issuance of Class A common stock sold in IPO, net of underwriting discounts — — 11,500 11 — — — — 129,364 — — 129,375 Deferred offering costs — — — — — — — — ( 3,361 ) — — ( 3,361 ) Issuance of restricted stock awards — — — — 36 — — — — — — — Exchange of Class B common stock for Class A common stock in connection with IPO — — 8,500 9 ( 8,500 ) ( 9 ) — — — — — — Exchange of Class B units for Class A common stock and redemption of corresponding Class B common stock in connection with registered offering subsequent to reorganization and IPO — — 3,000 3 ( 3,000 ) ( 3 ) — — — — — — Exchange of Class B common stock for Class A common stock — — 11,464 11 ( 11,464 ) ( 11 ) — — — — — — Balance at December 31, 2021 — — 34,464 $ 34 82,727 $ 83 123 $ ( 273 ) $ 650,405 $ ( 255,085 ) $ — $ 395,164 Net income — — — — — — — — — 29,206 193 29,399 Stock-based compensation — — — — — — — — 10,361 — — 10,361 Deferred offering costs — — — — — — — — ( 80 ) — — ( 80 ) Issuance of restricted stock awards — — 33 — — — — — — — — — Issuance of restricted stock units — — 405 — — — — — 3,833 — — 3,833 Exchange of Class B common stock for Class A common stock — — 8,422 9 ( 8,422 ) ( 9 ) — — — — — ( 0 ) Exercise of stock options — — 14 — — — — — — — — — Repurchase of common stock for employee tax witholding — — ( 35 ) — — — — — ( 454 ) — — ( 454 ) Stock repurchase — — ( 938 ) ( 1 ) ( 1,297 ) ( 1 ) 938 ( 9,653 ) ( 12,248 ) — — ( 21,903 ) Settlement of stock options — — — — — — — — ( 12,466 ) — — ( 12,466 ) Capital contributions from non-controlling interest — — — — — — — — — — 40,733 40,733 Distributions to non-controlling interest ( 181 ) ( 181 ) Dividends declared — — — — — — — — ( 1 ) — — ( 1 ) Dividends paid — — — — — — — — ( 10,522 ) — — ( 10,522 ) Balance at December 31, 2022 — — 42,365 42 73,008 73 1,061 ( 9,926 ) 628,828 ( 225,879 ) 40,745 433,883 91 The Notes to Consolidated Financial Statements are an integral part of these statements. P10, Inc. Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2022 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 29,399 $ 10,767 $ 23,806 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation 18,616 3,528 714 Non-cash incentive compensation — 1,396 — Depreciation expense 485 272 105 Amortization of intangibles 26,867 30,431 15,466 Amortization of debt issuance costs and debt discount 1,116 4,748 2,040 Income from unconsolidated subsidiaries ( 1,532 ) ( 1,087 ) — Deferred tax expense (benefit) 3,693 ( 8,140 ) ( 30,274 ) Loss on extinguishment of debt — 10,499 — Measurement of contingent payments to customers 676 — — Remeasurement of contingent consideration 1,717 3,472 — Post close purchase price adjustment 11 — — Change in operating assets and liabilities: Accounts receivable ( 1,066 ) 407 1,942 Due from related parties ( 24,181 ) ( 9,782 ) ( 427 ) Prepaid expenses and other assets 2,871 ( 1,390 ) ( 74 ) Right-of-use assets 2,912 1,651 1,186 Accounts payable ( 10,889 ) ( 702 ) 619 Accrued expenses 1,556 ( 2,674 ) 931 Accrued compensation and benefits 8,014 3,335 1,754 Due to related parties ( 101 ) 58 141 Other liabilities 3,950 1,554 ( 34 ) Deferred revenues ( 302 ) 2,606 ( 5,960 ) Lease liabilities ( 2,137 ) ( 1,930 ) ( 1,266 ) Net cash provided by operating activities 61,675 49,019 10,669 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions, net of cash acquired ( 96,455 ) ( 44,612 ) ( 213,909 ) Purchase of intangible assets ( 36 ) ( 30 ) — Note receivable ( 1,687 ) ( 2,552 ) — Proceeds from note receivable 7 — — Investments in unconsolidated subsidiaries — ( 2,638 ) — Proceeds from investments in unconsolidated subsidiaries 1,014 4,080 — Software capitalization ( 138 ) — — Post-closing payments related to acquisitions — ( 1,519 ) ( 250 ) Purchases of property and equipment ( 1,295 ) ( 129 ) ( 34 ) Net cash used in investing activities ( 98,590 ) ( 47,400 ) ( 214,193 ) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of redeemable noncontrolling interests — — 46,353 Repayment of notes payable to sellers — ( 9,406 ) — Repayment of loans payable — ( 31,658 ) — Borrowings on debt obligations 120,662 252,873 159,350 Repayments on debt obligations ( 43,162 ) ( 295,376 ) ( 4,798 ) Cash paid for extinguishment of debt — ( 4,813 ) — Repurchase of Class A common stock for employee tax withholding ( 454 ) — Repurchase of Class B common stock ( 12,248 ) — — Repurchase of Class A common stock ( 9,653 ) — Payment of preferred stock dividends — ( 2,313 ) — Proceeds from initial public offering — 138,000 — Payment of initial public offering underwriting fees — ( 8,626 ) — Payment of contingent consideration ( 7,344 ) ( 727 ) — Deferred offering costs — ( 3,361 ) — Cash settlement of stock options ( 12,466 ) ( 1,112 ) — Dividends paid ( 10,522 ) — — Debt issuance costs ( 1,888 ) ( 4,401 ) ( 4,064 ) Net cash provided by financing activities 22,925 29,080 196,841 Net change in cash, cash equivalents and restricted cash ( 13,990 ) 30,699 ( 6,683 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 43,482 12,783 19,466 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 29,492 $ 43,482 $ 12,783 92 The Notes to Consolidated Financial Statements are an integral part of these statements. P10, Inc. Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2022 2021 2020 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest $ 6,784 $ 18,719 $ 9,699 Cash paid for extinguishment of debt $ — $ 4,813 $ — Net cash paid for income taxes $ 2,480 $ 5,039 $ 1,169 NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES Issuance of redeemable noncontrolling interests in acquisition $ — $ — $ 141,354 Issuance of redeemable noncontrolling interests in exchange for tax amortization benefits — — 10,012 Issuance of noncontrolling interest in acquisition 40,745 — — Increase to purchase price of Enhanced for working capital adjustment — — 1,707 Additions to right-of-use assets 4,046 9,949 — Additions to lease liabilities 4,995 9,949 — Additions to contingent payments to customers 14,305 — — Additions to accrued contingent liability 14,305 — — Additions to property and equipment 949 — — Additions to accrued compensation and benefits 10,052 — — Additions to contingent consideration — 19,160 — Dividends declared 1 — — RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents $ 20,021 $ 40,916 $ 11,773 Restricted cash 9,471 2,566 1,010 Total cash, cash equivalents and restricted cash $ 29,492 $ 43,482 $ 12,783 93 The Notes to Consolidated Financial Statements are an integral part of these statements. P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Note 1. Description of Business Description of Business On October 20, 2021, P10 Holdings, Inc. ("P10 Holdings"), in connection with its Initial Public Offering ("IPO"), completed a reorganization and restructure. In connection with the reorganization, P10, Inc. ("P10") became the parent company and all of the existing equity of P10 Holdings, and its consolidated subsidiaries, including the convertible preferred units of P10 Intermediate, as defined below, were converted into common stock of P10. The offering and reorganization included a reverse stock split of P10 Holdings common stock on a 0.7-for-1 basis pursuant to which every outstanding share of common stock decreased to 0.7 shares. The number of shares have been retrospectively adjusted within these financial statements to reflect this stock split. The reorganization was considered a transaction between entities under common control. As a result, the consolidated financial statements for periods prior to the reorganization and IPO are the consolidated financial statements of P10 Holdings as the predecessor to P10 for accounting and reporting purposes. Following the reorganization and IPO, P10 has two classes of common stock, Class A common stock and Class B common stock. Each share of Class B common stock is entitled to ten votes while each share of Class A common stock is entitled to one vote. P10, Inc. and its consolidated subsidiaries (the “Company”) operate as a multi-asset class private market solutions provider in the alternative asset management industry. Our mission is to provide our investors differentiated access to a broad set of solutions and investment vehicles across a multitude of asset classes and geographies. Our existing portfolio of solutions across private equity, venture capital, private credit and impact investing support our mission by offering a comprehensive set of investment vehicles to our investors, including primary fund of funds, secondary investment, direct investment and co-investments, alongside separate accounts (collectively the “Funds”). The direct and indirect subsidiaries of the Company include P10 Holdings, P10 Intermediate Holdings, LLC (“P10 Intermediate”), which owns the subsidiaries P10 RCP Holdco, LLC (“Holdco”), Five Points Capital, Inc. (“Five Points”), TrueBridge Capital Partners, LLC (“TrueBridge”), Enhanced Capital Group, LLC (“ECG”), Bonaccord Capital Advisors, LLC ("Bonaccord"), Hark Capital Advisors, LLC ("Hark"), P10 Advisors, LLC ("P10 Advisors"), and Western Technology Investment Advisors LLC ("WTI"). Prior to November 19, 2016, P10, formerly Active Power, Inc. designed, manufactured, sold, and serviced flywheel-based uninterruptible power supply products and serviced modular infrastructure solutions. On November 19, 2016, we completed the sale of substantially all our assets and liabilities and operations to Langley Holdings plc, a United Kingdom public limited company. Following the sale, we changed our name from Active Power, Inc. to P10 Industries, Inc. and became a non-operating company focused on monetizing our retained intellectual property and acquiring profitable businesses. For the period from December 2016 through September 2017, our business primarily consisted of cash, certain retained intellectual property assets and our net operating losses (“NOLs”) and other tax benefits. On March 22, 2017, we filed for re-organization under Chapter 11 of the Federal Bankruptcy Code, using a prepackaged plan of reorganization. The Company emerged from bankruptcy on May 3, 2017. On December 1, 2017, the Company changed its name from P10 Industries, Inc. to P10 Holdings, Inc. We were founded as a Texas corporation in 1992 and reincorporated in Delaware in 2000. Our headquarters is in Dallas, Texas. On October 5, 2017, we closed on the acquisition of RCP Advisors 2, LLC ("RCP 2") and entered into a purchase agreement to acquire RCP Advisors 3, LLC ("RCP 3") in January 2018. On January 3, 2018, we closed on the acquisition of RCP 3. RCP 2 and RCP 3 are registered investment advisors with the United States Securities and Exchange Commission. On April 1, 2020, the Company completed the acquisition of Five Points. Five Points is a leading lower middle market alternative investment manager focused on providing both equity and debt capital to private, growth-oriented companies and limited partner capital to other private equity funds, with all strategies focused exclusively in the U.S. lower middle market. Five Points is a registered investment advisor with the United States Securities and Exchange Commission. On October 2, 2020, the Company completed the acquisition of TrueBridge. TrueBridge is an investment firm focused on investing in venture capital through fund-of-funds, co-investments, and separate accounts. TrueBridge is a registered investment advisor with the United States Securities and Exchange Commission. 94 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) On December 14, 2020, the Company completed the acquisition of 100 % of the equity interest in ECG, and a noncontrolling interest in Enhanced Capital Partners, LLC (“ECP”) (collectively, “Enhanced”). Enhanced undertakes and manages equity and debt investments in impact initiatives across North America, targeting underserved areas and other socially responsible end markets including renewable energy, historic building renovations, and affordable housing. ECP is a registered investment advisor with the United States Securities and Exchange Commission. On September 30, 2021, the Company completed acquisitions of Bonaccord and Hark. Bonaccord is an alternative asset manager focusing on acquiring minority equity interests in alternative asset management companies focused on private market strategies which may include private equity, private credit, real estate, and real asset strategies. Hark is engaged in the business of making loans to portfolio companies that are owned or controlled by financial sponsors, such as private equity funds or venture capital funds, and which do not meet traditional direct lending underwriting criteria but where the repayment of the loan by the portfolio company is guaranteed by its financial sponsor. See Note 3 for additional information on these acquisitions. In June 2022, the Company formed P10 Advisors, a fully consolidated subsidiary, to manage investment opportunities that are sourced across the P10 platform but do not fit within an existing investment mandate. On October 13, 2022, the Company completed the acquisition of all of the issued and outstanding membership interests of WTI. WTI provides senior secured financing to early-stage and emerging stage life sciences and technology companies. WTI is a registered investment advisor with the United States Securities and Exchange Commission. Simultaneously with the acquisition of WTI, the Company completed a restructuring of P10 Intermediate and subsidiaries to LLC entities that are considered disregarded entities for federal income tax purposes. This allowed the WTI sellers to obtain a partnership interest in P10 Intermediate and all of its subsidiaries. As a result of the acquisition, the WTI sellers obtained 3,916,666 membership units of P10 Intermediate, which can be exchanged into 3,916,666 shares of P10 class A common stock, following applicable restrictive periods. The results of WTI’s operations have been included in the consolidated financial statements effective October 13, 2022. The Company reports noncontrolling interest related to the partnership interests which are owned by the WTI sellers. This is recorded as noncontrolling interest on the Consolidated Balance Sheets. Noncontrolling interest is allocated a share of income or loss in the respective consolidated subsidiaries in proportion to their relative ownership interest. Additionally, the Company makes periodic distributions to the WTI sellers for tax related and other agreed upon expenses as disclosed in the purchase agreement. Note 2. Significant Accounting Policies Basis of Presentation The accompanying Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes it has made all necessary adjustments so that the Consolidated Financial Statements are presented fairly and that estimates made in preparing the Consolidated Financial Statements are reasonable and prudent. The Consolidated Financial Statements include the accounts of the Company, its wholly owned or majority-owned subsidiaries and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. All intercompany transactions and balances have been eliminated upon consolidation. Certain entities in which the Company holds an interest are investment companies that follow specialized accounting rules under U.S. GAAP and reflect their investments at estimated fair value. Accordingly, the carrying value of the Company’s equity method investments in such entities retains the specialized accounting treatment. Principles of Consolidation The Company performs the variable interest analysis for all entities in which it has a potential variable interest. If the Company has a variable interest in the entity and the entity is a variable interest entity (“VIE”), we will also analyze whether the Company is the primary beneficiary of this entity and if consolidation is required. 95 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Generally, VIEs are entities that lack sufficient equity to finance their activities without additional financial support from other parties, or whose equity holders, as a group, lack one or more of the following characteristics: (a) direct or indirect ability to make decisions, (b) obligation to absorb expected losses or (c) right to receive expected residual returns. A VIE must be evaluated quantitatively and qualitatively to determine the primary beneficiary, which is the reporting entity that has (a) the power to direct activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. To determine a VIE's primary beneficiary, we perform a qualitative assessment to determine which party, if any, has the power to direct activities of the VIE and the obligation to absorb losses and/or receive its benefits. This assessment involves identifying the activities that most significantly impact the VIE's economic performance and determine whether we, or another party, has the power to direct those activities. When evaluating whether we are the primary beneficiary of a VIE, we perform a qualitative analysis that considers the design of the VIE, the nature of our involvement and the variable interests held by other parties. See Note 7 for further information. The Company has determined that certain of its subsidiaries are VIEs, and that the Company is the primary beneficiary of the entities, because it has the power to direct activities of the entities that most significantly impact the VIE’s economic performance and has a controlling financial interest in each entity. Accordingly, the Company consolidates these entities, which includes P10 Intermediate, Holdco, RCP 2, RCP 3, TrueBridge, Bonaccord, Hark, and WTI. The assets and liabilities of the consolidated VIEs are presented on a gross basis in the Consolidated Balance Sheets. As a result of the reorganization in 2021, and reaffirmed after the 2022 restructure, it was determined that P10 Intermediate no longer qualifies as a VIE, but would still be consolidated under the voting interest model. This change has been retrospectively adjusted. See Note 7 for more information on both consolidated and unconsolidated VIEs. Entities that do not qualify as VIEs are assessed for consolidation under the voting interest model. Under the voting interest model, the Company consolidates those entities it controls through a majority voting interest or other means. P10 Holdings, P10 Inc., Five Points, P10 Advisors, and ECG are concluded to be consolidated subsidiaries of P10 under the voting interest model. Reclassifications Certain reclassifications have been made within the Consolidated Financial Statements to conform prior periods with current period presentation. Use of Estimates The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. As of December 31, 2022, and December 31, 2021, cash equivalents include money market funds of $ 7.8 million and $ 10.7 million, respectively, which approximates fair value. The Company maintains its cash balances at various financial institutions, which may periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limits. The Company believes it is not exposed to any significant credit risk on cash. Restricted Cash Restricted cash as of December 31, 2022 and December 31, 2021 was primarily cash that is restricted due to certain deposits being held by the Company for its customers. 96 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Accounts Receivable and Due from Related Parties Accounts receivable is equal to contractual amounts reduced for allowances, if applicable. The Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 2022 and December 31, 2021. If accounts are subsequently determined to be uncollectible, they will be expensed in the period that determination is made. Management fees are collected on a quarterly basis. Certain subsidiaries management fee contracts are collected at the beginning of the quarter, while others are collected in arrears. The management fees reflected in accounts receivable at period end are those that are collected in arrears. Due from related parties represents receivables from the Funds for reimbursable expenses from the Funds. Additionally, fees owed to the Company for the advisory agreement entered into upon the closing of the acquisitions of ECG and ECP ("Advisory Agreement") where ECG provides advisory services to Enhanced Permanent Capital, LLC ("Enhanced PC") are reflected in due from related parties on the Consolidated Balance Sheets. These amounts are expected to be fully collectible. Note Receivable Note receivable is mostly related to contractual amounts owed from a signed, secured promissory note with BCP Partners Holdings, LP ("BCP"). In addition to contractual amounts, borrowers are obligated to pay interest on outstanding amounts. The Company considers the note receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 2022 and December 31, 2021 . If accounts are subsequently determined to be uncollectible, they will be expensed in the period that determination is made. Investment in Unconsolidated Subsidiaries For equity investments in entities that we do not control, but over which we exercise significant influence, we use the equity method of accounting. The equity method investments are initially recorded at cost, and their carrying amount is adjusted for the Company’s share in the earnings or losses of each investee, and for distributions received. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. For certain entities in which the Company does not have significant influence and fair value is not readily determinable, we value these investments under the measurement alternative. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825, Financial Instruments, requires equity securities to be recorded at cost and adjusted to fair value at each reporting period. However, the guidance allows for a measurement alternative, which is to record the investments at cost, less impairment, if any, and subsequently adjust for observable price changes of identical or similar investments of the same issuer. Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the terms of the respective leases or service lives of the improvements, whichever is shorter, using the straight-line method. Expenditures for major renewals and betterments that extend the useful lives of the property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The estimated useful lives of the various assets are as follows: Computers and purchased software 3 - 5 years Furniture and fixtures 7 - 10 years Long-lived Assets Long-lived assets including property and equipment, lease right-of-use assets, and definite lived intangibles are evaluated for impairment under FASB ASC 360, Property, Plant, and Equipment . Long-lived assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 97 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) The carrying value of long-lived assets are determined to not be recoverable if the undiscounted estimated future net operating cash flows directly related to the asset or asset group, including any disposal value, is less than the carrying amount of the asset. If the carrying value of an asset is determined to not be recoverable, the impairment loss is measured as the amount by which the carrying value of the asset exceeds its fair value on the measurement date. Fair value is based on the best information available, including prices for similar assets and estimated discounted cash flows. Leases The Company recognizes a lease liability and right-of-use asset in our Consolidated Balance Sheets for contracts that it determines are leases or contain a lease. The Company’s leases primarily consist of operating leases for various office spaces. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. The Company’s right-of-use assets and lease liabilities are recognized at lease commencement based on the present value of lease payments over the lease term. Lease right-of-use assets include initial direct costs incurred by the Company and are presented net of deferred rent, lease incentives and certain other existing lease liabilities. Absent an implicit interest rate in the lease, the Company uses its incremental borrowing rate, adjusted for the effects of collateralization, based on the information available at commencement in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. Lease expense is recognized on a straight-line basis over the lease term. Additionally, upon amendments or other events, the Company may be required to remeasure our lease liability and right-of-use asset. The Company does not recognize a lease liability or right-of-use asset on our Consolidated Balance Sheets for short-term leases. Instead, the Company recognizes short-term lease payments as an expense on a straight-line basis over the lease term. A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option in the same manner as all other leases. Revenue Share and Repurchase Arrangement The Company recognizes an accrued contingent liability and contingent payments to customers asset in our Consolidated Balance Sheets for an agreement between ECG and a third party. The agreement requires ECG to share in certain revenues earned with the third party and also includes an option for the third party to sell back the revenue share to ECG at a set multiple. Additionally, ECG holds the option to buy back 50% of the revenue share at a set multiple. The options to repurchase the revenue share are not exercisable until July of 2025. The Company believes it is probable that the third party will exercise its option to sell back the revenue share and has recognized a liability on the Consolidated Balance Sheets. The Company has also recognized a contingent payment to customers associated with the agreement and will amortize the asset against revenue over the period the option is expected to be exercised. The amortization is reported in management and advisory fees on the Consolidated Statements of Operations. The Company will remeasure each reporting period. The asset is defined as contingent payments to customers and the liability is defined as accrued contingent liability on the Consolidated Balance Sheets. Refer to Note 14 for further information. Goodwill and Intangible Assets Goodwill is initially measured as the excess of the cost of the acquired business over the sum of the amounts assigned to identifiable assets acquired, less the liabilities assumed. As of December 31, 2022, goodwill recorded on our Consolidated Balance Sheets relates to the acquisitions of RCP 2, RCP 3, Five Points, TrueBridge, Enhanced, Bonaccord, Hark, and WTI. As of December 31, 2022, the intangible assets are comprised of indefinite-lived intangible assets and finite-lived intangible assets related to the acquisitions of RCP 2, RCP 3, Five Points, TrueBridge, Enhanced, Bonaccord, Hark, and WTI. Indefinite-lived intangible assets and goodwill are not amortized. Finite-lived technology is amortized using the straight-line method over its estimated useful life of 4 years . Finite-lived management and advisory contracts, which relate to acquired separate accounts and funds and investor/customer relationships with a specified termination date, are amortized in line with contractual revenue to be received, which range between 7 and 16 years . Certain of our trade names are considered 98 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) to have finite-lives. Finite-lived trade names are amortized over 10 years in line with the pattern in which the economic benefits are expected to occur. Goodwill is reviewed for impairment at least annually as of September 30 utilizing a qualitative or quantitative approach and more frequently if circumstances indicate impairment may have occurred. The impairment testing for goodwill under the qualitative approach is based first on a qualitative assessment to determine if it is more likely than not that the fair value of the Company’s reporting unit is less than the respective carrying value. The reporting unit is the reporting level for testing the impairment of goodwill. If it is determined that it is more likely than not that a reporting unit’s fair value is less than its carrying value, then the difference is recorded as an impairment (not to exceed the carrying amount of goodwill). At December 31, 2022 and December 31, 2021, the Company determined that there was no impairment to goodwill. Contingent Consideration Contingent consideration is initially measured at fair value on the date of the acquisition. The liabilities are remeasured at fair value on each reporting date, with changes in the fair value reflected in other income on our Consolidated Statements of Operations. As of December 31, 2022 and 2021, contingent consideration recorded relates to the acquisitions of Hark and Bonaccord. Accrued Compensation and Benefits Accrued compensation and benefits consists of employee salaries, bonuses, benefits, and acquisition-related earnouts (contingent on employment) not yet been paid. The acquisition-related earnout contingent on employment is a product of the acquisition of WTI. The sellers and eligible employees of WTI are eligible to earn up to $ 70.0 million contingent upon meeting certain EBITDA related hurdles that are contingent on employment. Upon the achievement of $ 20.0 million, $ 22.5 million, and $ 25.0 million of EBITDA, $ 35.0 million, $ 17.5 million, and $ 17.5 million are earned, respectively. The earnout period is eligible through December 31, 2027 with the potential to extend an additional two years . Debt Issuance Costs Costs incurred which are directly related to the issuance of debt are deferred and amortized using the effective interest method and are presented as a reduction to the carrying value of the associated debt on our Consolidated Balance Sheets. As these costs are amortized, they are included in interest expense, net within our Consolidated Statements of Operations. Noncontrolling Interest Noncontrolling interest ("NCI") reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by the Company. Noncontrolling interest is presented as a separate component in our consolidated statements of income to clearly distinguish between our interests and the economic interest of third parties in those entities. Net income attributable to P10, as reported in the consolidated statements of income, is presented net of the portion of net income attributable to holders of non-controlling interest. NCI is allocated a share of income or loss in the respective consolidated subsidiaries in proportion to their relative ownership interest. Treasury Stock The Company records common stock purchased for treasury at cost. At the date of subsequent reissuance, the treasury stock account is reduced by the cost of such stock using the average cost method. 99 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the FASB. As of December 31, 2022 and December 31, 2021, we used the following valuation techniques to measure fair value for assets and there were no changes to these methodologies during the periods presented: Level 1—Assets were valued using the closing price reported in the active market in which the individual security was traded. Level 2—Assets were valued using quoted prices in markets that are not active, broker dealer quotations, and other methods by which all significant inputs were observable at the measurement date. Level 3—Assets were valued using unobservable inputs in which little or no market data exists as reported by the respective institutions at the measurement date. The carrying values of financial instruments comprising cash and cash equivalents, prepaid assets, accounts payable, accounts receivable and due from related parties approximate fair values due to the short-term maturities of these instruments. The fair value of the credit and guarantee facility approximates the carrying value based on the interest rates which approximate current market rates. The Company has a contingent consideration liability related to the acquisitions of Hark and Bonaccord that is measured at fair value and is remeasured on a recurring basis. See Note 11 for additional information. Revenue Recognition Revenue is recognized when, or as, the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services. While the determination of who is the customer in a contractual arrangement will be made on a contract-by-contract basis, the customer will generally be the investment fund for the Company’s significant management and advisory contracts. Management and Advisory Fees The Company earns management fees for asset management services provided to the Funds where the Company has discretion over investment decisions. The Company primarily earns fees for advisory services provided to clients where the Company does not have discretion over investment decisions. Management and advisory fees received in advance reflects the amount of fees that have been received prior to the period the fees are earned. These fees are recorded as deferred revenues on the Consolidated Balance Sheets. For asset management and advisory services, the Company typically satisfies its performance obligations over time as the services are rendered, since the customers simultaneously receive and consume the benefits provided as the Company performs the service. The transaction price is the amount of consideration to which the Company expects to be entitled based on the terms of the arrangement. For certain funds, management fees are initially calculated based on committed capital during the investment period and on net invested capital through the remainder of the fund’s term. Additionally, the management fee may step down for certain funds depending on the contractual arrangement. Certain management fees are also calculated on capital deployed. Advisory services are generally based upon fixed amounts and billed quarterly. Other advisory services include transaction and management fees associated with managing the origination and ongoing compliance of certain investments. Other Revenue Other revenue on our Consolidated Statements of Operations primarily consists of subscriptions, consulting agreements and referral fees. The subscription and consulting agreements typically have renewable one-year lives, and revenue is recognized ratably over the current term of the subscription or the agreement. If subscriptions or fees have been paid in 100 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) advance, these fees are recorded as deferred revenues on our Consolidated Balance Sheets. Referral fee revenue is recognized upon closing of certain opportunities. Income Taxes Current income tax expense represents our estimated taxes to be paid or refunded for the current period. In accordance with ASC 740, Income Taxes (“ASC 740”), we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Uncertain tax positions are recognized only when we believe it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. We recognize interest and penalties, if any, related to uncertain tax positions in income tax expense. We file various federal and state and local tax returns based on federal and state local consolidation and stand-alone tax rules as applicable. Earnings Per Share Basic earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of common shares. Diluted EPS includes the determinants of basic EPS and common stock equivalents outstanding during the period adjusted to give effect to potentially dilutive securities. See Note 17 for additional information. Prior to the IPO, redeemable noncontrolling interests represented third party and related party interests in the Company's consolidated subsidiary, P10 Intermediate. Prior to the conversion of the redeemable convertible preferred shares issued by P10 Intermediate to class B shares, the numerator in the computation of diluted EPS was impacted by the redeemable convertible preferred shares. Under the if converted method, diluted EPS reflects a reduction in earnings that P10 would recognize by owning a smaller percentage of P10 Intermediate when the preferred shares are assumed to be converted. The denominator in the computation of diluted EPS is impacted by additional common shares that would have been outstanding if dilutive potential shares of common stock had been issued. Potential shares of common stock that may be issued by the Company include shares of common stock that may be issued upon exercise of outstanding stock options as well as the vesting of restricted stock units. Also included in the diluted EPS denominator are the units of P10 Intermediate owned by the sellers of WTI under the assumption that they were exercised. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase shares of common stock at the average market price during the period. 101 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Stock-Based Compensation Expense Stock-based compensation relates to grants for shares of P10 awarded to our employees through stock options as well as RSUs awarded to employees and RSAs issued to non-employee directors as compensation for service on the Company's board. Stock compensation expense for RSAs and certain RSUs, where vesting occurs after a service period is recorded ratably over the vesting period at the fair market value on the grant date. Stock compensation expense for performance based RSUs are recognized ratably over the implicit service period of when the awards are expected to be earned. Certain acquisition-related RSUs vest after meeting certain performance metrics. For these, the Company uses the tranche method for RSU's deemed probable of vesting and the expense is recorded over the expected vesting period. The Company evaluates the probability of vesting at each reporting period. Unvested units are remeasured quarterly against performance metrics as a liability on the Consolidated Balance Sheets and expense is recognized over the expected vesting period. Refer to Note 16 for further discussion. Stock option compensation cost is estimated at the grant date based on the fair-value of the award, which is determined using the Black Scholes option valuation model and is recognized as expense ratably over the requisite service period of the award, generally five years . The share price used in the Black Scholes model is based on the trading price of our shares on the public markets. Expected life is based on the vesting period and expiration date of the option. Stock price volatility is estimated based on a group of similar publicly traded companies determined to be most reflective of the expected volatility of the Company due to the nature of operations of these entities. The risk-free rates are based on the U.S. Treasury yield in effect at the time of grant. Forfeitures are recognized as they occur. Segment Reporting The Company operates as an integrated private markets solution provider and a single operating segment. According to ASC 280, Disclosures about Segments of an Enterprise and Related Information, operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker(s) in deciding how to allocate resources and in assessing performance. Business Acquisitions In accordance with ASC 805, Business Combinations (“ASC 805”), the Company identifies a business to have three key elements; inputs, processes, and outputs. While an integrated set of assets and activities that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set of assets and activities are not required if market participants can acquire the set of assets and activities and continue to produce outputs. In addition, the Company also performs a screen test to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. If the set of assets and activities is not considered a business, it is accounted for as an asset acquisition using a cost accumulation model. In the cost accumulation model, the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. The Company includes the results of operations of acquired businesses beginning on the respective acquisition dates. In accordance with ASC 805, the Company allocates the purchase price of an acquired business to its identifiable assets and liabilities based on the estimated fair values using the acquisition method. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. The excess value of the net identifiable assets and liabilities acquired over the purchase price of an acquired business is recorded as a bargain purchase gain. The Company uses all available information to estimate fair values of identifiable intangible assets and property acquired. In making these determinations, the Company may engage an independent third-party valuation specialist to assist with the valuation of certain intangible assets, notes payable, and tax amortization benefits. The consideration for certain of our acquisitions may include liability classified contingent consideration, which is determined based on formulas stated in the applicable purchase agreements. The amount to be paid under these arrangements is based on certain financial performance measures subsequent to the acquisitions. The contingent consideration included in the purchase price is measured at fair value on the date of the acquisition. The liabilities are remeasured at fair value on each reporting date, with changes in the fair value reflected in contingent consideration on our Consolidated Statements of Operations. 102 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) For business acquisitions, the Company recognizes the fair value of goodwill and other acquired intangible assets, and estimated contingent consideration at the acquisition date as part of purchase price. This fair value measurement is based on unobservable (Level 3) inputs. Dividends Dividends are reflected in the consolidated financial statements when declared. Recent Accounting Pronouncements The Company adopted ASU No. 2019-12, Income Taxes ("Topic 740") : Disclosure Framework - Simplifying the Accounting for Income Taxes , on January 1, 2021, which simplified the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and clarifying and amending existing guidance. The adoption of this standard did not have a material impact on our financial statements. Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 provides amendments to ASC 326, Financial Instruments - Credit Losses , which replaces the incurred loss impairment model with a current expected credit loss (“CECL”) model. CECL requires a company to estimate lifetime expected credit losses based on relevant information about historical events, current conditions and reasonable and supportable forecasts. The guidance must be applied using the modified retrospective adoption method on January 1, 2023, with early adoption permitted. The guidance does not have a material impact on the consolidated financial statements. On October 28, 2021, the FASB issued ASU 2021-08, which amends ASC 805 to “require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.” Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. The guidance is effective for fiscal years beginning after December 15, 2022. The Company adopted this guidance on January 1, 2023. The guidance had no effect on the consolidated financial statements. On June 30, 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"). The amendments in this Update affect all entities that have investments in equity securities measured at fair value that are subject to a contractual sale restriction. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amen d ments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The guidance is effective for fiscal years beginning after December 15, 2023. We are evaluating the effects of these amendments on our financial reporting. Note 3. Acquisitions Acquisition of Bonaccord On September 30, 2021 , the Company completed the purchase of Bonaccord for total consideration of $ 56.4 million, which includes cash and contingent consideration. Bonaccord is engaged in the business of acquiring minority interests in alternative asset management companies focused on private market strategies which may include private equity, private client, real estate, and real asset strategies. The acquisition was accounted for as a business combination under the acquisition method of accounting pursuant to ASC 805. The following is a summary of consideration paid: Fair Value Cash $ 38,927 Contingent consideration 17,435 Total purchase consideration $ 56,362 103 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) A total of $ 35.0 million of the cash consideration was financed through an amendment to the term loan under the Facility with HPS. The additional draw had the same terms as the existing Facility, including the maturity date. Included in total consideration is $ 17.4 million of contingent consideration, representing the fair value of expected future payments on the date of the acquisition. The amount ultimately owed to the sellers is based on achieving specific fundraising targets and any amounts paid to the sellers will be paid by October 2027, at which point the contingent consideration expires. Total payment contingent consideration will not exceed $ 20 million. As of December 31, 2022, $ 7.3 million has been paid in contingent consideration. The fair value of the contingent consideration was derived from an analysis of the option pricing model and the scenario based model. The assumptions used in the analysis are inherently subjective; therefore, the ultimate amount of the liability may differ materially from the current estimate. As of December 31, 2022, the estimated fair value of the remaining contingent consideration totaled $ 12.0 million. See Note 11 for more details. In connection with the acquisition, the Company incurred a total of $ 0.7 million of acquisition-related expenses. Total acquisition-related expenses were $ 0.2 million, $ 0.5 million and $ 0 for the years ended December 31, 2022, 2021 and 2020, respectively. These costs are included in professional fees on the Consolidated Statements of Operations. The following table presents the fair value of the net assets acquired as of the acquisition date: Fair Value ASSETS Prepaid expenses and other assets 9 Investment in partnership 1,396 Intangible assets 12,940 Total assets acquired $ 14,345 LIABILITIES Accrued expenses $ 919 Total liabilities assumed $ 919 Net identifiable assets acquired $ 13,426 Goodwill 42,936 Net assets acquired $ 56,362 The following table presents the fair value of the identifiable intangible assets acquired: Weighted- Average Amortization Fair Value Period Value of management and advisory contracts $ 9,450 8 Value of trade name 3,490 10 Total identifiable intangible assets $ 12,940 In connection with the acquisition, Bonaccord assumed a Strategic Alliance Agreement ("SAA"), providing a third-party the right to receive 15 % of the net management fee earnings, which includes the management fees minus applicable expenses, for Bonaccord Fund I ("Fund I"), and any subsequent fund, paid quarterly, in exchange for funding certain amounts of capital commitments to the fund. See Note 5 for more information. Goodwill The goodwill recorded as part of the acquisition includes the expected benefits that management believes will result from the acquisition, including the Company’s build out of its investment product offering. Approximately $ 42.9 million of goodwill is expected to be deductible for tax purposes. 104 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Acquisition of Hark On September 30, 2021 , the Company completed the purchase of Hark for total consideration of $ 7.2 million, which includes $ 5.0 million of cash and $ 2.2 million of estimated contingent consideration, with the fair value based on the scenario based method. The acquisition was accounted for as a business combination under the acquisition method of accounting pursuant to ASC 805. Hark is engaged in the business of making loans to portfolio companies that are owned or controlled by financial sponsors, such as private equity funds or venture capital funds, and which do not meet traditional direct lending underwriting criteria, but where the repayment of the loan by the portfolio company is guaranteed by its financial sponsor. T he fair value consisted of $ 2.5 million in net assets and $ 4.7 million in goodwill. The total contingent consideration payment will not exceed $ 5.4 million. Acquisition of WTI On October 13, 2022 , the Company completed the acquisition of all of the issued and outstanding membership interests of WTI for a total consideration of $ 146.0 million and an aggregate of 3,916,666 membership units of P10 Intermediate which can be exchanged on a one-for-one basis into shares of P10 class A common stock, subject to certain conditions pursuant to the Exchange Agreement entered into on August 25, 2022. The acquisition was accounted for as a business combination under the acquisition method of accounting pursuant to ASC 805. The following is a summary of consideration paid: Fair Value Cash $ 105,262 Fair value of equity consideration 40,733 Total purchase consideration $ 145,995 The Company exercised the accordion feature on the Credit Facility to complete the acquisition of WTI. The $ 125 million available on the accordion was split into $ 87.5 million of term loan and $ 37.5 million of revolver. The Company drew the $ 87.5 million of term loan and $ 6.0 million of the available revolver to complete the acquisition and financed the remainder with cash on hand. In connection with the acquisition, the Company incurred a total of $ 3.2 million of acquisition-related expenses. Total acquisition-related expenses were $ 3.2 million, $ 0 and $ 0 for the years ended December 31, 2022, 2021 and 2020, respectively. These costs are included in professional fees on the Consolidated Statements of Operations. The acquisition date fair value of certain assets and liabilities, including intangible assets acquired and related weighted average expected lives are provisional and subject to revision within one year of the acquisition date. As such, our estimates of fair values are pending finalization, which may result in adjustments to goodwill. The following table presents the provisional fair value of the net assets acquired as of the acquisition date: Fair Value ASSETS Cash and cash equivalents 8,807 Accounts receivable 12,632 Right-of-use assets 2,904 Prepaid expenses and other assets 378 Property and equipment 138 Intangible assets, net 49,700 Total assets acquired $ 74,559 LIABILITIES Accounts payable and accrued expenses $ 13,555 Lease liabilities $ 2,957 Total liabilities assumed $ 16,512 Net identifiable assets acquired $ 58,047 Goodwill 87,948 Net assets acquired $ 145,995 105 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) The following table presents the provisional fair value of the identifiable intangible assets acquired: Weighted- Average Amortization Fair Value Period Value of management and advisory contracts $ 42,900 9 Value of trade name 6,800 10 Total identifiable intangible assets $ 49,700 Goodwill The goodwill recorded as part of the acquisition includes the expected benefits that management believes will result from the acquisition, including the Company’s build out of its investment product offering. Approximately $ 87.9 million of goodwill is expected to be deductible for tax purposes. To the extent there are payments on EBITDA-related earnouts as discsused in Note 14, those amounts would be amortizable for tax purposes at such time. Identifiable Intangible Assets The fair value of management and advisory contracts acquired were estimated using the excess earnings method. Significant inputs to the valuation model include existing revenue, estimates of expenses and contributory asset charges, the economic life of the contracts and a discount rate based on a weighted average cost of capital. The fair value of trade names acquired were estimated using the relief from royalty method. Significant inputs to the valuation model include estimates of existing and future revenue, estimated royalty rate, economic life and a discount rate based on a weighted average cost of capital. The management and advisory contracts and trade names have a finite useful life. The carrying value of the management fund and advisory contracts and trade names will be amortized in line with the pattern in which the economic benefits arise and are reviewed at least annually for indicators of impairment in value that is other than temporary. Pro-forma Financial Information Current Year Acquisition: The following unaudited pro forma condensed consolidated results of operations of the Company assumes the acquisition of WTI was completed on January 1, 2021: For the Year Ended December 31, 2022 2021 Revenue $ 224,500 $ 182,446 Net income attributable to P10 24,513 6,044 Pro-forma adjustments include revenue and net income (loss) of the acquired business for each period. Other pro forma adjustments include intangible amortization expense, interest expense based on debt issued in connection with the acquisition, and compensation expense contingent on EBITDA (as noted in Note 14) as if the acquisition were completed on January 1, 2021. Additionally, this does not reflect any pro forma adjustments related to the acquisitions which occurred in 2021. Prior Year Acquisitions: The following unaudited pro forma condensed consolidated results of operations of the Company assumes the acquisition of Bonaccord was completed on January 1, 2020: 106 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) For the Year Ended December 31, 2021 2020 Revenue $ 169,728 $ 74,864 Net income attributable to P10 12,834 19,915 Pro-forma adjustments include revenue and net income (loss) of the acquired business for each period. Other pro forma adjustments include intangible amortization expense and interest expense based on debt issued or repaid in connection with the acquisition as if the acquisition was completed on January 1, 2020 . Note 4. Revenue The following presents revenues disaggregated by product offering: For the Year Ended December 31, 2022 2021 2020 Management and advisory fees $ 196,546 $ 149,424 $ 66,125 Subscriptions 642 641 671 Other revenue 1,172 469 572 Total revenues $ 198,360 $ 150,534 $ 67,368 Note 5. Strategic Alliance Expense In connection with the Bonaccord acquisition, Bonaccord assumed a SAA. This SAA provides the third-party the right to receive 15 % of the net management fee earnings, which includes the management fees minus applicable expenses, for Fund I and subsequent funds, paid quarterly, in exchange for funding certain amounts of capital commitments to the fund. Net management fee earnings the third-party has the right to receive is based on the total capital committed. Within 60 days following the final closing of the next fund, Bonaccord Fund II ("Fund II"), the third-party has the opportunity to acquire, at the price at the time of the original acquisition, equity interests in Bonaccord based on the amount of commitment made. For each $ 5.0 million, up to a maximum of $ 250.0 million in irrevocable capital commitments to Fund II, the third-party can acquire 10 basis points up to a maximum of 5 % equity in Bonaccord. In addition, net management fee earnings would increase by the same percentage, retroactive to the date of the first close in Fund II. The maximum commitment requirement has been met as of December 31, 2022. The Company believes its probable that the third-party will exercise the option to acquire equity in Bonaccord and has begun to accrue an additional 5 % of net management fee earnings. If executed, the purchase price shall be reduced by the amount of management fee distributions which the third-party would have been paid as of the initial closing of Fund II. Similar terms apply for Fund III with the exception that the third-party can acquire 9.8 basis points for every $ 5.0 million committed up to 4.9 %. This commitment has not yet been met as of December 31, 2022 as Fund III has not yet started raising capital. If commitment conditions to funds subsequent to Funds II and III are not satisfied, then within 60 days of the final closing of such subsequent fund giving rise to the condition not being satisfied, the Company may elect to repurchase the equity granted to the third-party. The repurchase shall be at the fair market value of such equi ty at that point in time. For the year ended December 31, 2022, the strategic alliance expense reported was $ 0.7 million . For the year ended December 31, 2021, the strategic alliance expense reported was $ 0.2 million. For the year ended December 31, 2020, there was no strategic alliance expense. This is reported on the Consolidated Statements of Operations as strategic alliance expense in operating expenses. Note 6. Note Receivable The Company's note receivable consists of an Advance Agreement and Secured Promissory Note that was executed on September 30, 2021 between the Company and BCP to lend funds to certain employees to be used to pay general partner commitments to certain funds managed by Bonaccord. This agreement provides for a note to BCP for $ 5.0 million, of which 107 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) $ 4.2 million was drawn as of December 31, 2022 with a maturity date of September 30, 2031 . The note will earn interest at the greater of (i) the applicable federal rate that must be charged to avoid imputation of interest under Section 1274(d) of the U.S. Internal Revenue Code and (ii) 5.5 %. Interest will be paid on December 31st of each year commencing December 31, 2021, with any unpaid accrued interest being capitalized and added to the outstanding principal balance. There was no cash paid for interest as of December 31, 2021 and the outstanding balance was capitalized to the note receivable. In 2022, $ 0.1 million of interest was repaid, the remainder was capitalized and added to the outstanding balance. Principal payments will be made periodically from mandatorily required payments from available cash flows at BCP. As of December 31, 2022 and December 31, 2021, the balance was $ 4.2 million and $ 2.6 million, respectively. The Company recognized interest income of $ 0.1 million, $ 0.1 million and $ 0 for the years ended December 31, 2022, 2021 and 2020, respectively. Note 7. Variable Interest Entities Consolidated VIEs The Company consolidates certain VIEs for which it is the primary beneficiary. VIEs consist of certain operating entities not wholly owned by the Company and include P10 Intermediate, Holdco, RCP 2, RCP 3, TrueBridge, Hark, Bonaccord, and WTI. See Note 2 for more information on the Company’s accounting policies related to the consolidation of VIEs. The assets of the consolidated VIEs totaled $ 568.0 million and $ 413.2 million as of December 31, 2022 and December 31, 2021 , respectively. The liabilities of the consolidated VIEs totaled $ 96.3 million and $ 53.6 million as of December 31, 2022 and December 31, 2021, respectively. The assets of our consolidated VIE’s are owned by those entities and not generally available to satisfy P10’s obligations, and the liabilities of our consolidated VIE’s are obligations of those entities and their creditors do not generally have recourse to the assets of P10. Unconsolidated VIEs Through its subsidiary, ECG, the Company holds variable interests in the form of direct equity interests in certain VIEs that are not consolidated because the Company is not the primary beneficiary. The Company's maximum exposure to loss is limited to the potential loss of assets recognized by the Company relating to these unconsolidated entities. Note 8. Investment in Unconsolidated Subsidiaries The Company’s investment in unconsolidated subsidiaries consist of equity method investments primarily related to ECG’s tax credit finance and asset management activities. As of December 31, 2022 , investment in unconsolidated subsidiaries totaled $ 2.3 million, of which $ 0.2 million related to ECG’s tax credit finance businesses and $ 2.1 million related to ECG’s asset management businesses. As of December 31, 2021 , investment in unconsolidated subsidiaries totaled $ 1.8 million, of which $ 1.6 million related to ECG’s asset management businesses and $ 0.2 million related to ECG’s tax credit finance businesses. Asset Management ECG manages some of its alternative asset management funds through various unconsolidated subsidiaries and records these investments under the equity method of accounting. ECG recorded its share of income in the amount of $ 1.5 million for the year ended December 31, 2022 and $ 1.1 million for the year ended December 31, 2021. For the year ended December 31, 2022 , ECG made $ 0 of capital contributions and received distributions of $ 1.0 million. For the year ended December 31, 2021, ECG made $ 0 of capital contributions and received $ 1.4 million in distributions. Tax Credit Finance ECG provides a wide range of tax credit transactions and consulting services through various entities which are wholly owned subsidiaries of Enhanced Tax Credit Finance, LLC (“ETCF”), which is a wholly owned subsidiary of ECG. Some of these subsidiaries own nominal interests, typically under 1.0%, in various VIEs and record these investments under the measurement alternative described in Note 2 above. For the years ended December 31, 2022 and December 31, 2021, ECG made $ 0 of capital contributions and received distributions of $ 0 . 108 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Note 9. Property and Equipment Property and equipment consist of the following: As of December 31, As of December 31, 2022 2021 Computers and purchased software $ 631 $ 387 Furniture and fixtures 2,201 461 Leasehold improvements 2,197 601 Other — 3 $ 5,029 $ 1,452 Less: accumulated depreciation ( 2,151 ) ( 471 ) Total property and equipment, net $ 2,878 $ 981 Note 10. Goodwill and Intangibles Changes in goodwill for the years ended December 31, 2022 and December 31, 2021 are as follows: Balance at December 31, 2020 $ 369,982 Purchase price adjustment 1,103 Increase from acquisitions 47,616 Balance at December 31, 2021 $ 418,701 Purchase price adjustment ( 11 ) Increase from acquisition 87,948 Balance at December 31, 2022 $ 506,638 Due to new information that became available during the year ended December 31, 2021 and a revision to the Company's outside basis and intangibles from finalizing the tax return, there was an adjustment to Enhanced that resulted in a purchase price adjustment. This was the result of using an estimate as of December 31, 2020 and resulted in a $ 1.3 million adjustment to the purchase price. Since this was completed during the measurement period, the adjustment was recorded as an adjustment to goodwill. Intangibles consists of the following: As of December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Indefinite-lived intangible assets: Trade names $ 17,350 $ — $ 17,350 Technology 30 — 30 Total indefinite-lived intangible assets 17,380 — 17,380 Finite-lived intangible assets: Trade names 28,251 ( 3,472 ) 24,779 Management and advisory contracts 194,066 ( 85,563 ) 108,503 Technology 2,374 ( 1,241 ) 1,133 Total finite-lived intangible assets 224,691 ( 90,276 ) 134,415 Total intangible assets $ 242,071 $ ( 90,276 ) $ 151,795 109 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) As of December 31, 2021 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Indefinite-lived intangible assets: Trade names $ 17,350 $ — $ 17,350 Technology 30 — 30 Total indefinite-lived intangible assets 17,380 — 17,380 Finite-lived intangible assets: Trade names 21,440 ( 1,785 ) 19,655 Management and advisory contracts 151,166 ( 60,934 ) 90,232 Technology 8,160 ( 6,639 ) 1,521 Total finite-lived intangible assets 180,766 ( 69,358 ) 111,408 Total intangible assets $ 198,146 $ ( 69,358 ) $ 128,788 Management and advisory contracts and finite lived trade names are amortized over 7 - 16 years and are being amortized in line with pattern in which the economic benefits that are expected to occur. Technology is amortized on a straight-line basis over 4 years. The amortization expense for each of the next five years and thereafter are as follows: 2023 30,501 2024 26,794 2025 22,367 2026 17,625 2027 12,810 Thereafter 24,318 Total amortization $ 134,415 Note 11. Fair Value Measurements The Company measures certain liabilities at fair value on a recurring basis. The following tables provide details regarding the classification of these liabilities within the fair value hierarchy as of the dates presented: As of December 31, 2022 Level I Level II Level III Total Liabilities Contingent consideration obligation $ - $ - $ 17,337 $ 17,337 Total liabilities $ - $ - $ 17,337 $ 17,337 As of December 31, 2021 Level I Level II Level III Total Liabilities Contingent consideration obligation $ - $ - $ 22,963 $ 22,963 Total liabilities $ - $ - $ 22,963 $ 22,963 For the liabilities presented in the tables above, there were no changes in fair value hierarchy levels during the years ended December 31, 2022 and 2021. The changes in the fair value of Level III financial instruments are set forth below: 110 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Contingent Consideration Liability For the Year Ended December 31, 2022 2021 Balance, beginning of period: $ 22,963 $ 593 Additions - 19,625 Change in fair value 1,717 3,472 Settlements ( 7,343 ) ( 727 ) Balance, end of period: $ 17,337 $ 22,963 The fair value of the contingent consideration liability represents the fair value of future payments upon satisfaction of performance targets. The assumptions used in the analysis are inherently subjective; therefore, the ultimate amount of the contingent consideration liability primarily relate to the expected future payments of obligations with a discount rate applied. The contingent consideration liability is included in contingent consideration on the Consolidated Balance Sheets. Changes in the fair value of the liability are included in contingent consideration expense on the Consolidated Statements of Operations. Note 12. Debt Obligations Debt obligations consists of the following: As of As of December 31, December 31, 2022 2021 Gross revolving credit facility state tax credits $ — $ - Debt issuance costs — ( 8 ) Revolving credit facility state tax credits, net $ — $ ( 8 ) Revolver facility $ 80,900 $ 90,900 Debt issuance costs ( 2,783 ) ( 2,981 ) Revolver facility, net $ 78,117 $ 87,919 Term loan $ 212,500 $ 125,000 Debt issuance costs ( 1,393 ) ( 415 ) Term loan, net $ 211,107 $ 124,585 Total debt obligations $ 289,224 $ 212,496 The table below summarizes terms of the debt obligations. December 31, 2022 Weighted Maturity Date Aggregate Facility Size Outstanding Debt Amount Available Net Carrying Value Average Interest Rate Term Loan 12/22/2025 $ 212,500 $ 212,500 $ — $ 211,107 4.08 % Revolver Facility 12/22/2025 162,500 80,900 81,600 78,117 4.14 % Total $ 375,000 $ 293,400 $ 81,600 $ 289,224 Refinancing On December 22, 2021, the Company extinguished its current debt outstanding with HPS, as described below in the Credit and Guaranty Facility section and simultaneously entered into a new credit agreement with JP Morgan Chase Bank, N.A. ("JP Morgan") in order to gain more favorable interest terms. The Company used the proceeds from the new credit agreement with JP Morgan not only to repay the outstanding balance with HPS but also to repay the notes payable to sellers as described below in the Notes Payable to Sellers section. Revolving Credit Facility State Tax Credits Enhanced State Tax Credit Fund III, LLC, a subsidiary of ECG, had a $ 10 million revolving credit facility with a regional financial institution restricted solely for the purchase of allocable state tax credits from various state tax credit incentive programs. The facility bore interest at 0.25 % above the Prime Rate and matured on June 15, 2022 . The facility was not renewed upon maturity. 111 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Notes Payable to Sellers On October 5, 2017, the Company issued Secured Promissory Notes Payable (“2017 Seller Notes”) in the amount of $ 81.3 million to the owners of RCP 2 in connection with the acquisition of that entity. The 2017 Seller Notes were set to mature on January 15, 2025 . On December 23, 2021, the Company used the proceeds from the new credit agreement with JP Morgan to repay the outstanding balance of the 2017 Sellers Notes. On January 3, 2018, the Company issued Secured Promissory Notes Payable (“2018 Seller Notes”) in the amount of $ 22.1 million to the owners of RCP 3 in connection with the acquisition of that entity. The 2018 Seller Notes were set to mature on January 15, 2025 . On December 23, 2021, the Company used the proceeds from the new credit agreement with JP Morgan to repay the outstanding balance of the 2018 Sellers Notes. On January 3, 2018, the Company issued tax amortization benefits in the amount of $ 48.4 million (“TAB Payments”) to the owners of RCP 3 in connection with the acquisition of that entity. The TAB Payments were set to mature on April 15, 2023 . On December 23, 2021, the Company used the proceeds from the new credit agreement with JP Morgan to repay the outstanding balance of the TAB Payments. Non-cash interest expense was recorded on a periodic basis for the Notes payable to sellers. During the year ended December 31, 2022, we recorded $ 0 in interest expense related to the TAB Payments. For the years ended December 31, 2021 and December 31, 2020, P10 recorded $ 9.2 million and $ 1.0 million, respectively, in interest expense related to the TAB Payments. Of the $ 9.2 million recorded in 2021, $ 8.4 million related to the debt extinguishment. The 2017 Seller Notes, the 2018 Seller Notes and the TAB Payments are collectively referred to as “Notes payable to sellers” on our Consolidated Financial Statements. Credit and Guaranty Facility The Company’s subsidiary, Holdco, entered into the Facility with HPS as administrative agent and collateral agent on October 7, 2017. The Facility initially provided for a $ 130.0 million senior secured credit facility in order to refinance the existing debt obligations of RCP Advisors and provide for the financing to repay the Seller Notes due resulting from the acquisition of RCP Advisors. The Facility provided for a $ 125 million five-year term, subject to certain EBITDA levels and conditions, and a $ 5 million one-year line of credit. The line of credit was repaid and subsequently expired during 2018. Holdco was permitted to draw up to $ 125 million in aggregate on the term loan in tranches through July 31, 2019 . On October 2, 2020 and December 14, 2020, in connection with the acquisitions of TrueBridge and Enhanced, the term loan under the Facility was amended adding an additional $ 91.4 million and $ 68.0 million to the Facility, respectively. On September 30, 2021, in connection with the acquisition of Bonaccord, the term loan under the Facility was amended adding an additional $ 35.0 million to the Facility. On October 28, 2021, a payment of $ 88.6 million was made, which included an optional repayment of $ 86.8 million, required prepayment penalty of $ 1.2 million, and an accrued interest payment of $ 0.6 million. On December 22, 2021, the remaining principal balance of $ 200 million was repaid using the proceeds of the new credit facility with JP Morgan. In accordance with the Facility, the Company also paid the remaining accrued interest balance of $ 2.1 million and an early extinguishment fee of $ 3.7 million. Revolving Credit Facility and Term Loan On December 22, 2021, the Company entered into a new credit agreement (the "Credit Agreement") with JPMorgan, in its capacity as administrative agent and collateral agent, and Texas Capital Bank, as joint lead arrangers and joint bookrunners, and the other loan parties party thereto. The Credit Agreement consists of a revolving credit facility with an available balance of $ 125 million (the "Revolver Facility"), a term loan for $ 125 million (the "Term Loan"), and the Credit 112 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Agreement also includes a $ 125.0 million accordion feature which was exercised with the acquisition of WTI. In October 2022, the accordion feature was exercised at which point it was split into $ 87.5 million worth of term loan and $ 37.5 million of revolver. The facilities are "Term SOFR Loans" meaning loans bearing interest based upon the "Adjusted Term SOFR Rate". The Adjusted Term SOFR Rate is the Secured Overnight Financing Rate ("SOFR") at the date of election, plus 0.10 %. The Company can elect one or three months for the Revolver Facility and three or six months for the Term Loan. Principal is contractually repaid at a rate of 1.25 % on the term loan quarterly effective March 31, 2023. The Revolving Credit Facility has no contractual principal repayments until maturity, which is December 22, 2025 for both facilities. Certain P10 subsidiaries are encumbered by this debt agreement. The Credit Agreement contains affirmative and negative covenants typical of such financing transactions, and specific financial covenants which require P10 to maintain a minimum leverage ratio. As of December 31, 2022, P10 was in compliance with its financial covenants required under the facility. As of December 31, 2022 , the balance drawn on the revolving credit facility is $ 80.9 million and on the term loan, the balance is $ 212.5 million. The balance as of December 31, 2021 was $ 90.9 million and $ 125.0 million, respectively. Debt Payable Future principal maturities of debt as of December 31, 2022 are as follows: 2023 $ 10,625 2024 10,625 2025 272,150 $ 293,400 Debt Issuance Costs Debt issuance costs are offset against the Revolving Credit Facility State Tax Credits, the Credit and Guaranty Facility, and the Revolver Facility and Term Loan. Unamortized debt issuance costs for the Credit and Guaranty Facility as of December 31, 2022 and December 31, 2021 were $ 0 and $ 0 , respectively. Unamortized debt issuance costs for the Revolving Credit Facility State Tax Credits as of December 31, 2022 and December 31, 2021 were $ 0 and $ 8 thousand, respectively. Unamortized debt issuance costs for the Revolver Facility and Term Loan as of December 31, 2022 and December 31, 2021 were $ 4.2 million and $ 3.4 million, respectively. Amortization expense related to debt issuance costs totaled $ 1.1 million for the year ended December 31, 2022 , $ 6.0 million for the year ended December 31, 2021 and $ 1.1 million for the year ended December 31, 2020. Of the $ 6.0 million of amortization expense recognized in 2021, $ 2.1 million relates to the extinguishment of the Credit and Guaranty Facility and is included in loss on extinguishment on the Consolidated Statements of Operations for the year ended December 31, 2021. During the years ended December 31, 2022 and December 31, 2021 , we recorded $ 1.9 million and $ 4.4 million in debt issuance costs, respectively, which is included in debt obligations on the Consolidated Balance Sheets. Most of the debt issuance costs recorded during 2022 relate to the exercise of the accordion feature. Note 13. Related Party Transactions Effective January 1, 2021, the Company entered into a sublease with 210 Capital, LLC, a related party, for office space serving as our corporate headquarters. The monthly rent expense is $ 20.3 thousand, and the lease expires December 31, 2029 . In the fourth quarter of 2022, the Company sublet an additional amount of office space in the corporate headquarters. This contributed an additional $ 3.4 thousand monthly. P10 has paid $ 0.3 million, $ 0.2 million and $ 0 in rent to 210 Capital, LLC for the years ended December 31, 2022, 2021 and 2020, respectively. Effective April 1, 2020, P10 Intermediate pays a quarterly management fee of $ 250 thousand to Keystone Capital XXX, LLC, which was the holder of the Series B preferred shares issued by P10 Intermediate in connection with the acquisition of Five Points. As a result of that agreement, P10 Intermediate paid $ 0 , $ 0.8 million and $ 0.5 for the years ended December 31, 2022, 2021 and 2020, respectively. This management fee was terminated effective October 20, 2021 when the 113 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Company's redeemable noncontrolling interest was converted to shares of Class B common stock in connection with the Company's IPO. As described in Note 1, through its subsidiaries, the Company serves as the investment manager to the Funds. Certain expenses incurred by the Funds are paid upfront and are reimbursed from the Funds as permissible per fund agreements. As of December 31, 2022, the total accounts receivable from the Funds totaled $ 16.8 million , of which $ 6.2 million related to reimbursable expenses and $ 10.6 million related to fees earned but not yet received. As of December 31, 2021 , the total accounts receivable from the Funds totaled $ 2.4 million, of which $ 1.6 million related to reimbursable expenses and $ 0.8 million related to fees earned but not yet received. In certain instances, the Company may incur expenses related to specific products that never materialize. The costs are then removed from the balance sheet and expensed on the Consolidated Statements of Operations. The management fees described here are included in accounts receivable on the Consolidated Balance Sheets and the reimbursable expenses are included in due from related parties on the Consolidated Balance Sheets. Upon the closing of the Company’s acquisition of ECG and ECP, the Advisory Agreement between ECG and Enhanced PC immediately became effective. Under this agreement, ECG provides advisory services to Enhanced PC related to the assets and operations of the permanent capital subsidiaries owned by Enhanced PC, as contributed by both ECG and ECP, and new projects undertaken by Enhanced PC. In exchange for those services, which commenced on January 1, 2021, ECG receives advisory fees from Enhanced PC based on a declining fixed fee schedule, initially totaling $ 76.0 million over 7 years . As a result of new projects during 2021, ECG will receive additional advisory fees from Enhanced PC totaling $ 22.0 million over 7 years , based on a declining fixed fee schedule. This agreement is subject to customary termination provisions. Since inception, $ 41.2 million of the total $ 98.0 million advisory fees have been recognized as revenue. For the years ended December 31, 2022, 2021 and 2020, advisory fees earned or recognized under this agreement were $ 22.2 million, $ 19 million and $ 0 , respectively, and is reported in management and advisory fees on the Consolidated Statements of Operations. As of December 31, 2022 and December 31, 2021, the balance was $ 28.5 million and $ 9.5 million and is included in due from related parties on the Consolidated Balance Sheets. Upon the closing of the Company’s acquisition of ECG and ECP, the Administrative Services Agreement between ECG and Enhanced Capital Holdings, Inc. (“ECH”), the entity which holds a controlling equity interest in ECP, immediately became effective. Under th is agreement, ECG will pay ECH for the use of their employees to provide services to Enhanced PC at the direction of ECG. The Company recognized $ 11.5 million, $ 8.3 million and $ 0.4 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to this agreement within compensation and benefits on our Consolidated Statements of Operations. On September 10, 2021, ECG entered into a strategic partnership with Crossroads Impact Corp ("Crossroads"), parent company of Capital Plus Financial ("CPF"), a leading certified development financial institution. Under the terms of the agreement, Enhanced will originate and manage loans across its diverse lines of business including small business loans to women and minority owned businesses, and loans to renewable energy and community development projects. The loans will be held by CPF and CPF will pay an advisory fee to Enhanced. The Company recognized $ 2.8 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively, which is included in management and advisory fees on the Consolidated Statements of Operations. No revenues were recognized for the year ended December 31, 2020. On July 6, 2022, Crossroads entered into the Advisory Agreement (the “Crossroads Advisory Agreement) with ECG. The Crossroads Advisory Agreement provides for ECG to receive a services fee of 1.5 % per year of the capital deployed by Crossroads under the Crossroads Advisory Agreement ( 0.375 % quarterly), and an incentive fee of 15 % over a 7 % hurdle rate. On July 6, 2022, certain funds managed by the Company purchased 4,646,840 shares of Crossroads common stock at $ 10.76 per shares, for an aggregate amount of approximately $ 50 million. On August 1, 2022, an additional purchase of 1,394,052 shares of Crossroads common stock at $ 10.76 per share occurred. The Co-CEOs of the Company are directors of Crossroads . The Company recognized $ 0.1 million for the year ended December 31, 2022, which is included in management and advisory fees on the Consolidated Statements of Operations. No revenues were recognized for the years ended December 31, 2021 and 2020. Upon the closing of the Bonaccord acquisition on September 30, 2021, an Advance Agreement and Secured Promissory Note was signed with BCP, an entity that was formed by employees of the Company. For details, see Note 6. 114 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Note 14. Commitments and Contingencies Operating Leases The Company leases office space and various equipment under non-cancelable operating leases, with the longest lease expiring in 2032. These lease agreements provide for various renewal options. Rent expense for the various leased office space and equipment was approximately $ 3.5 million for the year ended December 31, 2022 and $ 2.0 million for the year-ended December 31, 2021 , respectively. Rent expense for the year ended December 31, 2021 included a reduction to overall expense of $ 0.3 million for a rent concession as a result of the COVID-19 pandemic. P10 elected the practical expedient, whereby the concessions were treated as a reduction of rent expense during the period received. The following table presents information regarding the Company’s operating leases as of December 31, 2022: Operating lease right-of-use assets $ 15,923 Operating lease liabilities $ 18,558 Cash paid for lease liabilities $ 2,346 Weighted-average remaining lease term (in years) 6.81 Weighted-average discount rate 2.83 % The future contractual lease payments as of December 31, 2022 are as follows: 2023 3,003 2024 3,881 2025 2,741 2026 2,417 2027 2,338 Thereafter 7,201 Total undiscounted lease payments 21,581 Less discount ( 3,023 ) Total lease liabilities $ 18,558 Earnout Payment With the acquisition of WTI, an earnout payment of up to $ 70.0 million of cash and common stock may be earned upon meeting certain performance metrics.Upon the achievement of $ 20.0 million, $ 22.5 million, and $ 25.0 million of EBTIDA, $ 35.0 million, $ 17.5 million, and $ 17.5 million are earned, respectively. Of the total amount, $ 50.0 million can be earned by the sellers and the remaining $ 20.0 million would be allocated to employees of the Company at the time the earnout is earned. Payment to both sellers and employees is contingent on employment and, therefore, these earnout payments are recorded as compensation expense on the Consolidated Statements of Operations. The Company will evaluate whether each earn-out hurdle is probable of occurring and recognize an expense over the period the hurdle is expected to be achieved. As of December 31, 2022, the Company has determined that only the first two EBITDA hurdles are probable of being achieved. Total payment will not exceed $ 70.0 million and any amounts paid will be paid by October 2027, at which point the earnout expires. For the period ended December 31, 2022, December 31, 2021, and December 31, 2020, $ 5.2 million, $ 0.0 million, and $ 0.0 . million were recognized, respectively. As of December 31, 2022, December 31, 2021, and December 31, 2022, the balance was $ 5.2 million, $ 0.0 million, and $ 0.0 million and is included in accrued compensation and benefits in the Consolidated Balance Sheets. No payments have been made on the earnout. Bonus Payment In connection with the acquisition of WTI, certain employees entered into employment agreements. As part of these employment agreements, certain employees may receive a one-time bonus payment if the employee is employed by the Company as of the fifth anniversary of the effective date and the trailing-twelve month EBITDA of WTI at that time is equal to or greater than $ 20.0 million. Payment can be made in cash or stock of P10, provided that no more than $ 5.0 million will be payable in cash. Total payment will not exceed $ 10.0 million and any amounts will be paid in October 2027, the fifth anniversary of the effective date. For the period ended December 31, 2022, December 31, 2021, and December 30, 2020, the Company recognized $ 0.4 million, $ 0.0 . million, and $ 0.0 million of expense, respectively, which is included in 115 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) compensation and benefits on the consolidated statement of operations. As of December 31, 2022, December 31, 2021, and December 30, 2020, the balance was $ 0.4 million, $ 0.0 million, and $ 0.0 million, respectively, and is included in accrued compensation and benefits on the Consolidated Balance Sheets. Revenue Share Arrangement The Company recognizes an accrued contingent liability and contingent payments to customers asset in our Consolidated Balance Sheets for an agreement that exists between ECG and a third party. The agreement requires ECG to share in certain revenues earned with the third party and also includes an option for the third party to sell back the revenue share to ECG at a set multiple. The Company’s contingent liabilities and corresponding contingent payments to customers are recognized once determined to be probable. The contingent payments to customers are amortized and recorded within management and advisory fees on the Consolidated Statements of Operations over the expected period before exercise of an option occurs. As of December 31, 2022, the Company has determined that the put options are probable and have accrued an estimated contingent liability and contingent payments to customers. As of December 31, 2022, December 31, 2021, and December 31, 2020, the balance was $ 14.3 million, $ 0.0 million, and $ 0.0 million, respectively, and is included in accrued contingent liabilities on the Consolidated Balance Sheets. The associated contingent payments to customers asset balance was $ 13.6 million, $ 0.0 million, and $ 0.0 million as of December 31, 2022, December 31, 2021, and December 31, 2020, respectively. The Company recognized $ 0.7 million, $ 0.0 million, and $ 0.0 million of amortization of contingent payments to customers for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively, which is included in management and advisory fees on the Consolidated Statements of Operations. The Company will remeasure each period and recognize all changes as if they occurred at inception and recognize changes in revenue. Contingencies We may be involved, either as plaintiff or defendant, in a variety of ongoing claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of our business. We evaluated all potentially significant litigation, government investigations, claims or assessments in which we are involved and do not believe that any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any. Note 15. Income Taxes All the Company's operations are domestic. The components of the provision (benefit) for income taxes attributable to continuing operations are as follows: For the Years Ended December 31, 2022 2021 2020 Current Federal $ 193 $ 918 $ 2,104 State 2,178 152 1,333 Total Current $ 2,371 $ 1,070 $ 3,437 Deferred Federal $ 3,995 $ ( 6,727 ) ( 28,906 ) State ( 302 ) ( 1,413 ) ( 1,368 ) Total Deferred $ 3,693 $ ( 8,140 ) $ ( 30,274 ) Total provision (benefit) $ 6,064 $ ( 7,070 ) $ ( 26,837 ) The reconciliation of the Company's federal statutory rate to the effective tax rate is as follows: 116 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) For the Years Ended December 31, 2022 2021 2020 Federal statutory rate 21.0 % 21.0 % 21.0 % Noncontrolling interest ( 0.1 %) 0.0 % 0.0 % State taxes, net of federal benefit 4.0 % ( 20.8 %) 7.4 % Permanent items and other 0.6 % ( 4.6 %) 2.0 % Expiration of net operating losses and tax credits ( 7.3 %) 70.0 % ( 125.7 %) Valuation allowance increase/decrease ( 0.3 %) ( 247.8 %) 1168.7 % Uncertain tax positions ( 0.8 %) ( 9.8 %) ( 145.2 %) Return to provision adjustments and change in tax rates ( 0.4 %) 0.9 % ( 42.8 %) Other 0.4 % 0.0 % 0.0 % Effective rate 17.1 % ( 191.1 %) 885.4 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 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 reverse. During the year, the Company completed an organizational restructure whereby the majority of it’s assets were contributed to a majority owned entity, treated as a partnership for US Federal Income Tax purposes. As a result, the deferred taxes related to the contributed assets and liabilities have been characterized as a deferred tax asset arising from the outside basis difference in the partnership investment. Significant components of the Company's deferred taxes are as follows: As of As of December 31, December 31, 2022 2021 Deferred tax assets: Deferred revenue $ - $ 675 Capitalized legal costs - 1,249 Stock compensation 2,428 762 Interest expense 5,107 4,837 Other 1,382 1,307 Right of use assets - operating leases - 3,998 Investment in partnership 9,029 5,740 Debt obligations - 10,430 Suspended losses - 28 Intangibles 1,365 - Net operating losses and credit carryforwards 34,736 47,205 Total deferred tax assets 54,047 76,231 Valuation allowance for deferred tax assets ( 12,763 ) ( 12,857 ) Deferred tax assets, net of valuation allowance $ 41,284 $ 63,374 Deferred tax liabilities: Goodwill - ( 8,455 ) Intangibles - ( 5,728 ) Investment in partnership - ( 147 ) Property and equipment ( 9 ) ( 127 ) Right of use assets—operating leases - ( 3,766 ) Total deferred tax liabilities ( 9 ) ( 18,223 ) Deferred tax assets, net $ 41,275 $ 45,151 117 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Due to the uncertainty of realizing the benefits of our domestic favorable tax attributes in future tax returns, as of December 31, 2022, the Company has recorded a valuation allowance against its net deferred tax asset of $ 12.8 million. During the years ended December 31, 2022 and 2021, the valuation allowance decreased by approximately $ 0.1 million and $ 4.2 million, respectively. The 2022 decrease is primarily attributable to the release of valuation allowances for state net operating loss carryforwards while the 2021 valuation allowance decrease is due primarily to the release of valuation allowance on partnership outside basis differences. Among other factors in 2022, the Company’s long-term management and advisory fee contracts and related projected income serve as the positive evidence to support the release of the valuation allowance. Additionally, the Company’s restructuring undertaken in 2021 as part of the IPO transaction introduced new sources of taxable income available to absorb existing loss carry forwards. With the exception of certain deferred tax assets, primarily related to built-in capital losses, management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. As of De cember 31, 2022, the Company had federal and post-apportioned state NOL carryforwards of approximately $ 177.4 million and $ 21.8 million, respectively, and research and development credit carryforwards of approximately $ 5.3 million. The federal NOL and credit carryforwards may expire beginning in 2023, if not utilized. This includes $ 2.8 million of federal NOLs that may expire in 2023, $ 24.3 million that may expire in 2024, and $ 150.3 million that may expire between 2025-2037. The state NOLs may expire beginning in 2023, if not utilized. This includes $ 4.5 million that may expire between 2023 and 2029 and $ 17.2 million that may expire between 2030 and 2039. Utilization of the NOLs and tax credits may be subject to substantial annual limitation due to the “change of ownership” provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses and credit carryforwards before utilization. Tax positions are evaluated utilizing a two-step process. The Company first determines whether any of its tax positions are more-likely-than-not to be sustained upon examination, based solely on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured as the largest amount of benefit that is greater than 50 % likely of being realized upon ultimate settlement. The reconciliation of the Company's unrecognized tax benefits at the beginning and end of the year is as follows: For the Years Ended December 31, 2022 2021 Balance at January 1 $ 7,017 $ 7,378 Additions based on tax positions related to the current year - - Additions for tax positions of prior years - - Reductions for tax positions of prior years ( 275 ) ( 361 ) Settlements - - Balance at December 31 $ 6,742 $ 7,017 The uncertain tax position is primarily related to transfer pricing, research and development credits and state exposure due to intercompany interest expense. The Company does not anticipate any significant changes to the unrecognized tax benefits within the next twelve months. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2022, the Company has $ 0.1 million of accrued interest and penalties related to uncertain tax positions. The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company is not currently under audit in any other income tax jurisdictions. We are generally subject to U.S. federal and state tax examinations for all tax years since 1999 due to our net operating loss carryforwards and the utilization of the carryforwards in years still open under statute. Note 16. Stockholders' Equity Equity-Based Compensation 118 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) On July 20, 2021, the Board of Directors approved the P10 Holdings, Inc. 2021 Stock Incentive Plan (the "Plan"), which replaced the 2018 Incentive Plan ("2018 Plan"), our previously existing equity compensation plan. The Compensation Committee of the Board of Directors may issue equity-based awards including stock options, stock appreciation rights, restricted stock units and restricted stock awards. Options previously granted under the 2018 Plan cliff vest over a period of four or five year s. The term of each option is no more than ten year s from the date of grant. When the options are exercised, the Board of Directors has the option of issuing shares of common stock or paying a lump sum cash payment on the exercise date equal to the difference between the common stock’s fair market value on the exercise date and the option price. Terms of all future awards will be granted under the Plan, and no additional awards will be granted under the 2018 Plan. Awards granted under the 2018 Plan continue to follow the 2018 Plan. The 2018 Plan provided for an initial 6,300,000 shares (adjusted for the reverse stock split). The Plan provided for the issuance of 3,000,000 shares available for grant, in addition to those approved in the 2018 Plan for a total of 9,300,000 shares. On March 15, 2022, the Board of Directors approved the settlement of 1.1 million options from a grantee with a fair market value option price of $ 11.83 , less a negotiated discount of 2.5 %, totaling $ 12.5 million. This was paid on April 4, 2022. On June 17, 2022, at the Annual Meeting of Stockholders, the shareholders authorized an increase of 5,000,000 shares that may be issued under the Plan creating a total of 14,300,000 shares available for grant under the Plan and the 2018 Plan. On October 21, 2022, a special meeting of stockholders was held to increase the number of shares issuable under the Plan by 4,000,000 shares. As of December 31, 2022, there are 7.1 million shares available for grant. A summary of stock option activity for the years ended December 31, 2022 and December 31, 2021 is as follows: Weighted Average Contractual Life Aggregate Number of Weighted Average Remaining Intrinsic Value Shares Exercise Price (in years) (whole dollars) Outstanding as of December 31, 2020 5,350,800 $ 1.69 7.75 $ 41,442,250 Granted 2,224,250 8.54 Exercised — — Expired/Forfeited ( 472,114 ) 3.27 Outstanding as of December 31, 2021 7,095,936 $ 3.71 7.45 $ 73,156,722 Exercisable as of December 31, 2021 1,483,445 $ 0.93 5.76 $ 27,661,727 Outstanding as of December 31, 2021 7,095,936 $ 3.71 7.45 $ 73,156,722 Granted 4,948,733 10.90 Exercised ( 47,905 ) 6.34 Settled ( 1,120,000 ) 0.41 Expired/Forfeited ( 264,533 ) 9.73 Outstanding as of December 31, 2022 10,612,231 $ 7.25 8.09 $ 39,004,141 Exercisable as of December 31, 2022 314,105 $ 3.74 5.74 $ 2,176,407 The weighted average assumptions used in calculating the fair value of stock options granted during the years ended December 31, 2022 and December 31, 2021 were as follows: 119 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) For the Year Ended December 31, 2022 2021 Expected life 7.5 (yrs) 7.5 (yrs) Expected volatility 36.57 % 41.65 % Risk-free interest rate 3.50 % 0.82 % Expected dividend yield 0.85 % 0.00 % The Company has granted restricted stock awards ("RSAs") to certain employees. Holders of RSAs have no voting rights and accrue dividends until vesting with payment being made once they vest. All of the shares currently vest one year from the grant date. Number of Weighted-Average Grant RSAs Date Fair Value Per RSA Outstanding as of December 31, 2020 $ - $ - Granted 36,033 12.49 Vested - - Forfeited - - Outstanding as of December 31, 2021 36,033 12.49 Outstanding as of December 31, 2021 36,033 $ 12.49 Granted 33,346 12.37 Vested ( 36,033 ) 12.49 Forfeited — — Outstanding as of December 31, 2022 33,346 $ 12.37 The Company has granted restricted stock units ("RSUs") to certain employees. Holders of RSUs have no voting rights and are not eligible to receive dividends or other distributions paid with respect to any RSUs that have not vested. All of the shares currently vest one year from the grant date excluding the restricted stock units at Hark and Bonaccord which are discussed in more detail below. At the time of the Bonaccord acquisition, the Company entered into a Notice of Restricted Stock Units with certain employees of Bonaccord for grants of Restricted Stock Units ("Bonaccord Units") to be allocated to employees at a later date for meeting certain performance metrics. The Bonaccord Units may not be transferred, sold, pledged, exchanged, assigned or otherwise encumbered or disposed of by any grantee until it has become vested. On August 16, 2022, allocations were finalized pursuant to which an aggregate a value of $ 17.5 million of units may vest at each future achievement of performance metrics . As of December 31, 2022, certain performance metrics have been met and 345,765 units have been allocated and issued to specific employees. The Company evaluates whether it is probable that the Bonaccord Units will vest and applies the tranche method to determine the amount of expense to recognized during the period. An expense of $ 7.0 million has been recorded for the year ended December 31, 2022 on the Consolidated Statements of Operations. The unrecognized expense associated with the Bonaccord Units was $ 5.0 million as of December 31, 2022. At the time of the Hark acquisition, the Company entered into a Notice of Restricted Stock Units with an employee, which grants Restricted Stock Units ("Hark Units") for meeting a certain performance metric. The Hark Units may not be transferred, s old, pledged, exchanged, assigned or otherwise encumbered or disposed of by any grantee until they have become vested. As of December 31, 2022, no Hark Units have vested but the Company believes it is probable that the RSUs will be earned. An expense of $ 1.3 million has been recorded for the year ended December 31, 2022 on the Consolidated Statements of Operations. Unvested units are recognized ratably as a liability on the Consolidated Balance Sheets and expense is recognized over the expected vesting period. The unrecognized expense associated with the Hark Units was $ 0.3 million as of December 31, 2022. The below table does not include Bonaccord or Hark Units that were issued outside of the Plan, that have not vested and are recorded as a liability. 120 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Number of Weighted-Average Grant RSUs Date Fair Value Per RSU Outstanding as of December 31, 2020 $ - $ - Granted 59,654 12.74 Vested - - Forfeited - - Outstanding as of December 31, 2021 59,654 12.74 Outstanding as of December 31, 2021 59,654 $ 12.74 Granted 853,900 11.16 Vested ( 405,419 ) 12.65 Forfeited — — Outstanding as of December 31, 2022 508,135 $ 11.34 Compensation expense equal to the grant date fair value is recognized for these awards over the vesting period and is included in compensation and benefits on our Consolidated Statements of Operations. The stock-based compensation expense was $ 18.6 million, $ 3.5 million and $ 0.7 million for the years ended December 31, 2022, 2021 and 2020, respectively. Of the $ 18.6 million of stock-based compensation expense recognized during the year ended December 31, 2022, $ 8.3 million re lates to the Bonaccord Units and Hark Units. Unrecognized stock-based compensation expense related to outstanding unvested stock options as of December 31, 2022 was $ 5.8 million and is expected to be recognized over a weighted average period of 3.14 years. Any future forfeitures will impact this amount. Note 17. Earnings Per Share The Company presents basic EPS and diluted EPS for our common stock. Basic EPS excludes potential dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if shares of common stock were issued pursuant to our stock-based compensation awards. Additionally, diluted EPS reflects the potential dilution that could occur if convertible preferred shares of P10 Intermediate were converted into common shares of P10 Intermediate. This is only applicable to fiscal year 2020 as the preferred shares of P10 Intermediate converted to shares of Class B common stock effective with the IPO. For the year ended December 31, 2022, diluted EPS reflects the potential dilution that could occur assuming the exercise of partnership units in P10 Intermediate, that were granted as a result of the WTI acquisition. The following table presents a reconciliation of the numerators and denominators used in the computation of basic and diluted EPS: 121 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) For the Year Ended December 31, 2022 2021 2020 Numerator: Numerator for basic calculation—Net income Numerator for basic calculation—Net income attributable to P10 $ 29,206 $ 9,174 $ 23,086 Adjustment for: Net income attributable to noncontrolling interest in P10 Intermediate 193 - - Numerator for earnings per share Numerator for earnings per share assuming dilution $ 29,399 $ 9,174 $ 23,086 Denominator: Denominator for basic calculation—Weighted- average shares 116,751 72,660 62,465 Weighted shares assumed upon conversion of partnership units 979 - - Weighted shares assumed upon exercise of stock options and vesting of RSUs 3,924 39,670 2,440 Denominator for earnings per share assuming dilution 121,655 112,332 64,905 Earnings per share—basic $ 0.25 $ 0.13 $ 0.37 Earnings per share—diluted $ 0.24 $ 0.08 $ 0.36 The computations of diluted earnings per share excluded options to purchase 6.7 million shares of common stock for the year ended December 31, 2022 and 0.1 million options for the year ended December 31, 2021, respectively, because the options were anti-dilutive. Note 18. Redeemable Noncontrolling Interest In connection with the closing of the acquisition of Five Points on April 1, 2020, the Company formed a new subsidiary, P10 Intermediate, which was the acquiring entity of Five Points. On April 1, 2020, P10 Intermediate issued three series (A, B and C) of redeemable convertible preferred shares. On October 2, 2020 and December 14, 2020, P10 Intermediate issued two additional series (D and E) in connection with the acquisitions of TrueBridge and Enhanced. The preferred shares on an as-if-converted basis represent approximately 40.9 % of the aggregate issued and outstanding share capital of P10 Intermediate with P10 owning the remaining 59.1 % through its 100 % ownership of the outstanding common stock of P10 Intermediate. The third-party ownership interest represents a noncontrolling interest in P10 Intermediate, which we have a controlling interest in. Dividends on the preferred shares were recognized as preferred dividends attributable to redeemable non-controlling interest in our Consolidated Statements of Operations. In connection with the IPO on October 20, 2021, all preferred shares were contractually converted to Class B common shares. Note 19. Subsequent Events On March 9, 2023, the Company granted to employees 2,677,974 options under the 2021 Incentive Plan. The options vest over five years and expire ten years from the grant date. On March 9, 2023, the Company granted to employees 906,343 res tricted stock units under the 2021 Incentive Plan. The options vest over one year . The Board of Directors of the Company has declared a quarterly dividend of $ 0.03 per share of Class A and Class B common stock, payable on March 31, 2023, to the holders of record as of the close of business on March 16, 2023. In accordance with ASC 855, Subsequent Events, the Company evaluated all material events or transactions that occurred after December 31, 2022, the Consolidated Balance Sheet date, through the date the Consolidated Financial 122 P10, Inc. Notes to Consolidated Financial Statements (dollar amounts stated in thousands) Statements were issued, and determined there have been no additional events or transactions that would materially impact the Consolidated Financial Statements. 123 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable.