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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the three months ended March 31, 2022

OR

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

For the transition period from ____________________ to ____________________

Commission File Number: 001-40937

 

P10, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

87-2908160

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

4514 Cole Ave, Suite 1600

Dallas, TX

75205

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (214) 865-7998

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.001 par value per share

Series A Junior Participating Preferred Stock Purchase Rights

 

PX

 

NYSE

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

 

As of May 9, 2022, there were 35,743,597 shares of the registrant's Class A common stock and 81,449,150 shares of the Registrant's Class B common stock, issued and outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I

 FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Consolidated Balance Sheets

1

 

Consolidated Statements of Operations

2

 

Consolidated Statements of Changes in Stockholders' Equity

3

 

Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Consolidated Financial Statements

6

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

Item 4.

Controls and Procedures

42

 

 

 

PART II

 OTHER INFORMATION

 

Item 1.

Legal Proceedings

43

Item 1A.

Risk Factors

43

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 3.

Defaults Upon Senior Securities

43

Item 4.

Mine Safety Disclosures

43

Item 5.

Other Information

43

Item 6.

Exhibits

44

Signatures

 

45

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 

P10, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)

 

 

 

As of

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

23,655

 

 

$

40,916

 

Restricted cash

 

 

2,017

 

 

 

2,566

 

Accounts receivable

 

 

2,602

 

 

 

2,087

 

Note receivable

 

 

2,776

 

 

 

2,552

 

Due from related parties

 

 

18,871

 

 

 

13,124

 

Investment in unconsolidated subsidiaries

 

 

2,031

 

 

 

1,803

 

Prepaid expenses and other assets

 

 

4,055

 

 

 

4,759

 

Property and equipment, net

 

 

1,149

 

 

 

981

 

Right-of-use assets

 

 

14,193

 

 

 

14,789

 

Deferred tax assets, net

 

 

42,847

 

 

 

45,151

 

Intangibles, net

 

 

122,642

 

 

 

128,788

 

Goodwill

 

 

418,690

 

 

 

418,701

 

Total assets

 

$

655,528

 

 

$

676,217

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

742

 

 

$

401

 

Accrued expenses

 

 

10,714

 

 

 

12,474

 

Due to related parties

 

 

405

 

 

 

2,258

 

Other liabilities

 

 

13,727

 

 

 

1,808

 

Contingent consideration

 

 

23,090

 

 

 

22,963

 

Deferred revenues

 

 

11,929

 

 

 

12,953

 

Lease liabilities

 

 

15,296

 

 

 

15,700

 

Debt obligations

 

 

187,690

 

 

 

212,496

 

Total liabilities

 

 

263,593

 

 

 

281,053

 

COMMITMENTS AND CONTINGENCIES (NOTE 14)

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

Class A common stock, $0.001 par value; 510,000,000 shares authorized; 35,686,073  issued and 35,686,073 outstanding as of March 31, 2022, and 34,464,920 issued and 34,464,920 outstanding December 31, 2021, respectively

 

 

35

 

 

 

34

 

Class B common stock, $0.001 par value; 180,000,000 shares authorized; 81,630,126 shares issued and 81,506,674 shares outstanding as of March 31, 2022, 82,851,279 shares issued and 82,727,827 shares outstanding as of December 31, 2021, respectively

 

 

82

 

 

 

83

 

Treasury stock

 

 

(273

)

 

 

(273

)

Additional paid-in-capital

 

 

639,384

 

 

 

650,405

 

Accumulated deficit

 

 

(247,293

)

 

 

(255,085

)

Total stockholders' equity

 

 

391,935

 

 

 

395,164

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

655,528

 

 

$

676,217

 

 

The Notes to Consolidated Financial Statements are an integral part of these statements.

 

1


 

P10, Inc.

Consolidated Statements of Operations

(Unaudited, in thousands except per share amounts)

 

 

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

2022

 

 

2021

 

REVENUES

 

 

 

 

 

 

Management and advisory fees

 

$

43,027

 

 

$

32,573

 

Other revenue

 

 

254

 

 

 

195

 

Total revenues

 

 

43,281

 

 

 

32,768

 

OPERATING EXPENSES

 

 

 

 

 

 

Compensation and benefits

 

 

18,494

 

 

 

11,936

 

Professional fees

 

 

2,612

 

 

 

2,731

 

General, administrative and other

 

 

4,112

 

 

 

2,037

 

Contingent consideration expense

 

 

127

 

 

 

28

 

Amortization of intangibles

 

 

6,181

 

 

 

7,484

 

Strategic alliance expense

 

 

152

 

 

 

 

Total operating expenses

 

 

31,678

 

 

 

24,216

 

INCOME FROM OPERATIONS

 

 

11,603

 

 

 

8,552

 

OTHER (EXPENSE)/INCOME

 

 

 

 

 

 

Interest expense implied on notes payable to sellers

 

 

 

 

 

(215

)

Interest expense, net

 

 

(1,385

)

 

 

(5,255

)

Other income

 

 

329

 

 

 

288

 

Total other (expense)

 

 

(1,056

)

 

 

(5,182

)

Net income before income taxes

 

 

10,547

 

 

 

3,370

 

Income tax expense

 

 

(2,755

)

 

 

(661

)

NET INCOME

 

$

7,792

 

 

$

2,709

 

Less: preferred dividends attributable to redeemable
   noncontrolling interest

 

 

-

 

 

 

(494

)

NET INCOME ATTRIBUTABLE TO P10

 

$

7,792

 

 

$

2,215

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

Basic earnings per share

 

$

0.07

 

 

$

0.03

 

Diluted earnings per share

 

$

0.06

 

 

$

0.02

 

Weighted average shares outstanding, basic

 

 

117,193

 

 

 

62,465

 

Weighted average shares outstanding, diluted

 

 

121,537

 

 

 

66,577

 

 

The Notes to Consolidated Financial Statements are an integral part of these statements.

 

2


 

P10, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Common Stock - Class A

 

 

Common Stock - Class B

 

 

Treasury stock

 

Additional

 

Accumulated

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

Paid-in-capital

 

Deficit

 

Equity

 

Balance at December 31, 2020

 

62,464

 

 

$

63

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

123

 

 

$

(273

)

$

324,310

 

$

(264,259

)

$

59,841

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

424

 

 

 

 

424

 

Net income attributable to P10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,215

 

 

2,215

 

Balance at March 31, 2021

 

62,464

 

 

 

63

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

123

 

 

$

(273

)

$

324,734

 

$

(262,044

)

$

62,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Common Stock - Class A

 

 

Common Stock - Class B

 

 

Treasury stock

 

Additional

 

Accumulated

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

Paid-in-capital

 

Deficit

 

Equity

 

Balance at December 31, 2021

 

 

 

$

 

 

 

34,464

 

 

$

34

 

 

 

82,727

 

 

$

83

 

 

 

123

 

 

$

(273

)

$

650,405

 

$

(255,085

)

$

395,164

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,515

 

 

 

 

1,515

 

Deferred offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70

)

 

 

 

(70

)

Net income attributable to P10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,792

 

 

7,792

 

Exchange of Class B common stock for Class A common stock

 

 

 

 

 

 

 

1,222

 

 

 

1

 

 

 

(1,220

)

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

Settlement of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,466

)

 

 

 

(12,466

)

Balance at March 31, 2022

 

 

 

$

 

 

 

35,686

 

 

$

35

 

 

 

81,507

 

 

$

82

 

 

 

123

 

 

$

(273

)

$

639,384

 

$

(247,293

)

$

391,935

 

 

The Notes to Consolidated Financial Statements are an integral part of these statements.

 

3


 

P10, Inc.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

7,792

 

 

$

2,709

 

Adjustments to reconcile net income to net cash provided by operating
   activities:

 

 

 

 

 

 

Stock-based compensation

 

 

1,515

 

 

 

424

 

Depreciation expense

 

 

95

 

 

 

66

 

Amortization of intangibles

 

 

6,181

 

 

 

7,484

 

Amortization of debt issuance costs and debt discount

 

 

202

 

 

 

944

 

Income from unconsolidated subsidiaries

 

 

(326

)

 

 

(220

)

Deferred tax expense

 

 

2,304

 

 

 

117

 

Remeasurement of contingent consideration

 

 

127

 

 

 

28

 

Post close purchase price adjustment

 

 

11

 

 

 

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(515

)

 

 

(511

)

Due from related parties

 

 

(5,747

)

 

 

192

 

Prepaid expenses and other assets

 

 

634

 

 

 

703

 

Right-of-use assets

 

 

596

 

 

 

400

 

Accounts payable

 

 

341

 

 

 

(252

)

Accrued expenses

 

 

(14,226

)

 

 

(278

)

Due to related parties

 

 

(1,853

)

 

 

(2,200

)

Other liabilities

 

 

11,919

 

 

 

189

 

Deferred revenues

 

 

(1,024

)

 

 

134

 

Lease liabilities

 

 

(404

)

 

 

(453

)

Net cash provided by operating activities

 

 

7,622

 

 

 

9,476

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Note receivable

 

 

(231

)

 

 

 

Proceeds from note receivable

 

 

7

 

 

 

 

Investments in unconsolidated subsidiaries

 

 

 

 

 

(2,087

)

Proceeds from investments in unconsolidated subsidiaries

 

 

98

 

 

 

2,133

 

Software capitalization

 

 

(35

)

 

 

 

Post-closing payments for Enhanced working capital

 

 

 

 

 

(1,207

)

Purchases of property and equipment

 

 

(263

)

 

 

(22

)

Net cash used in investing activities

 

 

(424

)

 

 

(1,183

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Repayments on debt obligations

 

 

(25,000

)

 

 

(7,258

)

Payments of contingent consideration

 

 

 

 

 

(414

)

Debt issuance costs

 

 

(8

)

 

 

(27

)

Net cash used in financing activities

 

 

(25,008

)

 

 

(7,699

)

Net change in cash, cash equivalents and restricted cash

 

 

(17,810

)

 

 

594

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning
   of period

 

 

43,482

 

 

 

12,783

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of
   period

 

$

25,672

 

 

$

13,377

 

 

The Notes to Consolidated Financial Statements are an integral part of these statements.

 

4


 

P10, Inc.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

2022

 

 

2021

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

398

 

 

$

4,624

 

Net cash (received)/paid for income taxes

 

$

(236

)

 

$

407

 

NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Additions to right-of-use assets

 

 

 

 

 

1,823

 

Additions to lease liabilities

 

 

 

 

 

1,823

 

Accrual for settlement of stock options

 

 

12,466

 

 

 

 

Additions to contingent consideration

 

 

127

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND
   RESTRICTED CASH

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,655

 

 

$

12,179

 

Restricted cash

 

 

2,017

 

 

 

1,198

 

Total cash, cash equivalents and restricted cash

 

$

25,672

 

 

$

13,377

 

 

The Notes to Consolidated Financial Statements are an integral part of these statements.

 

5


P10, Inc.

Notes to Consolidated Financial Statements

(Unaudited, 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, which is a wholly owned subsidiary of P10 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 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") and Hark Capital Advisors, LLC ("Hark").

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.

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

6


P10, Inc.

Notes to Consolidated Financial Statements

(Unaudited, dollar amounts stated in thousands)

 

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.

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. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ended December 31, 2022.

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.

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 determining 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 Holdco, RCP 2, RCP 3, TrueBridge, Bonaccord, and Hark. 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, it was determined that

7


P10, Inc.

Notes to Consolidated Financial Statements

(Unaudited, dollar amounts stated in thousands)

 

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 Intermediate, Five Points 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 the 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 March 31, 2022, and December 31, 2021, cash equivalents include money market funds of $7.4 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 March 31, 2022 and December 31, 2021 was primarily cash that is restricted due to certain deposits being held for customers.

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 March 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.

Due from related parties represents receivables from the Funds for management fees earned but not yet received and reimbursable expenses from the Funds. These amounts are expected to be fully collectible.

Note Receivable

Note receivable is equal to contractual amounts owed from a signed, secured promissory note with the Company. 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 March 31, 2022 or as of December 31, 2021. If accounts are subsequently determined to be uncollectible, they will be expensed in the period that determination is made. See Note 6 for further discussion surrounding the note receivable.

8


P10, Inc.

Notes to Consolidated Financial Statements

(Unaudited, dollar amounts stated in thousands)

 

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.