Full Year Results

RNS Number : 1935L

Public Policy Holding Company, Inc.

12 May 2022

 

Public Policy Holding Company, Inc.

Full Year Results for the year ending 31 December 2021

Full year expectations exceeded

Encouraging momentum into 2022

Public Policy Holding Company, Inc., ("PPHC", the "Group" or the "Company"), a leading bi-partisan, full-service US government affairs business, is pleased to announce its Full Year Results for the year ending 31 December 2021.

Financial highlights

·     $99.3 million revenue (2020 $77.5 million), an increase of 28.2% (24.4% organic growth)

·     $32.0 million normalised EBITDA¹ (2020: $21.5 million), an increase of 48.7%

·     Normalised EBITDA margin of 32.2% (2020: 27.8%)

·     Normalised adjusted profit before tax² of $31.8 million (2020: $21.4 million)

·     Net cash³ at year-end of $17.8 million following the gross $15 million ($13.8 million net of fees and FX) equity fundraise at IPO (2020: $5.9 million)

·     Dividend of $0.0065 per Common Share (for the period from 16 December 2021, the date of IPO, to 31 December 2021)

Operational highlights

·     Admitted to trading on AIM in December 2021, raising $15 million gross ($13.8 million net of fees and FX) to fund accelerated growth strategy and talent acquisition

·   Significant new client wins within core federal lobbying practices including Accenture, Boeing, Siemens Energy and World Shipping Council

·     Total number of clients increased to more than 730 (retained clients with revenues equal to or in excess of $100k per annum increasing to 347 (2020: 295))

·     No single client representing more than 2.5% of overall revenues in the year ended 31 December 2021

·     Total number of employees increased to 187 (2020: 179)

Events post year-end

·     Recruitment of Neal Strum as Chief Legal Officer on 1 January 2022

·     Seven Letter officially launched its Environmental, Social and Governance ("ESG") communications advisory practice in March 2022

·     Forbes Tate Partners added senior executive, Rob Mathias, to its Public Affairs practice in May 2022

¹ Normalised EBITDA is illustrative and calculated on the basis that 25% of pre-bonus EBITDA is paid as bonus, in line with the Group's policy post IPO.

2 Adjusted normalised profit before tax excluded amortisation of customer intangibles and ASC 718-10-S99-2 share-based accounting charge

3 Net cash excludes long term operating lease liability

Stewart Hall, CEO, PPHC commented:

"2021 was a milestone year for PPHC culminating in our successful admission to AIM in December 2021. The Group's strong financial performance throughout 2021 reflects the hard work and dedication of our teams, combined with PPHC's resilient and scalable model. Despite the challenges of COVID-19, the Company exceeded management's expectations, has continued to attract high quality new talent and advance an exciting pipeline of acquisition opportunities.

PPHC started its first year as a listed business in a strong position, with the momentum achieved in 2021 continuing into this financial year. We expect organic initiatives and M&A to broaden and deepen the Group's leading capability, drive further market share gains and revenue growth into the coming financial year.

The Group has a well-defined growth strategy and a strong foundation of blue-chip clients on which to build and we look forward to the future with confidence."

  Enquiries

Public Policy Holding Company Inc. Stewart Hall, CEO William Chess, CFO	[phone]
Stifel (Nominated Adviser & Broker) Fred Walsh, Tom Marsh, Ross Poulley	[phone]
Instinctif Partners Tim Linacre, Rozi Morris, Guy Scarborough	[phone] [e-mail]

About PPHC

PPHC is a leading bi-partisan, full-service US government affairs business. It operates a portfolio of independent firms offering public affairs, crisis management, lobbying and advocacy services on behalf of corporate, trade association and non-profit client organisations. Clients engage the Group to enhance and defend their reputations, advance policy goals, manage regulatory risk, or otherwise engage with US federal and state-level policy makers, stakeholders, media, and directly to the public at large.

Since its inception in 2014, the Group acquired and integrated eight businesses, now operating as five separate, independent companies, focused at the federal government level in the US and with expanding reach into key US states and metropolitan areas. The five operating entities which form the operating subsidiaries of the Group are Crossroads Strategies LLC, Forbes Tate Partners LLC, Seven Letter, O'Neill & Associates and Alpine Group Partners LLC.

For more information, see www.pphcompany.com

Chairman's report

Overview

On behalf of the Board of Directors of PPHC, which was established on 10 December 2021 in preparation for the initial public offering on 16 December 2021, I am pleased to introduce this report reflecting a full year of solid revenue growth, significant talent acquisitions and strong cost management by the Group.

2021 was a year of crisis, recovery and renewal in the United States and around the world. PPHC's work with and for government, business and non-profit community organisations helped defend our communities against the COVID-19 pandemic and return the US economy to growth.

During the year PPHC delivered revenue of $99.3 million, up more than 28.2% on the previous year and ahead of previous expectations. Normalised EBITDA increased by 48.7% to $32 million with significant growth in normalised adjusted profit before tax.

The Group's unique and bi-partisan model is highly scalable and offers a comprehensive suite of services across all key sectors, which is well suited to manage macroeconomic disruption. Despite the economic interruptions in the US, and around the world, caused by the ongoing COVID-19 pandemic and a turbulent transfer of power between US presidential administrations and political parties, each of the Group's operating firms remained fully in service to our clients, competitive to new client opportunities, and accountable to our broader set of stakeholders.

With the US and global economies facing strong headwinds due to inflationary pressures, a resurgence of COVID-19 in key global markets, and political stalemate in advance of the US mid-term elections, which will determine control of both federal legislative chambers, the House of Representatives and Senate, as well as many state governorships and legislatures, the Group's expertise and range of services are increasingly critical to corporate leaders and their trade associations.  The timely addition of expertise and credentials in key growth areas will help support ongoing growth and client retention.

Strategy

PPHC has a clearly defined growth strategy as set out at the time of IPO, which aims to deliver significant shareholder value through a combination of organic and acquisitive growth activity.

Our successful admission to AIM in December 2021 raised $15 million, enabling the Group to accelerate its growth strategy to pursue further acquisition targets, expand existing service capabilities, attract and retain senior talent, and broaden its geographic footprint into key U.S. state capitals and metropolitan areas, as well as internationally.

Looking ahead

PPHC has a clearly defined growth strategy with a strong balance sheet and is well positioned to deliver sustainable shareholder value through its proven track record of organic and acquisitive growth. Led by its highly experienced and entrepreneurial management team, the Group's deep, bipartisan networks and relationships at federal and state level should enable PPHC to continue to benefit from ongoing regulatory and technological disruption. The Board looks to the future with confidence and to delivering long-term shareholder value.

Simon Lee

Non-executive Chairman

Chief Executive Officer's report

Overview

In the face of a very challenging year, each of our nearly 200 employees proved their unique talents and entrepreneurial spirit during 2021. Our longstanding commitments to our clients, colleagues, and communities were on full display as we emerged together as a market leader in industry.

When Crossroads Strategies and Forbes Tate Partners came together to launch PPHC nearly a decade ago, the convergence of traditional government advocacy and the growing importance of its impact on corporate reputation was just beginning.  Rising from the depths of the global economic crisis in 2008-09 and through to the present day's COVID pandemic, a global economic recovery, and the unyielding pace of digital disruption on our economy and political systems, our first eight years have coincided with historic levels of government intervention and spending in the economy, thereby making our work more critical than ever.

This era, like none other before, has inextricably linked government and big business through historic investments in infrastructure, healthcare, and clean energy, just to name a few - coinciding with a digital dispersion of political, social discourse.

Put simply:  PPHC is designed for this new era.

In 2021 PPHC firms provided valuable strategies, direct advocacy and creative communications campaigns for more than 730 individual client accounts.

For our partners and colleagues, 187 employees as of year-end, our firms maintained close knit and healthy workplaces through enhanced training, investments in IT, and COVID-safe meetings and client development activities. We also welcomed over 20 new members to the PPHC team and saw an employee turnover rate of just 19% - very low for the consulting sector.

As for our industry and our community at large, our firms contributed over $168,000 in cash gifts and provided pro-bono services to a total 60 local and national causes and non-profit institutions ranging from cancer care and prevention, youth homelessness and environmental conservation.

Successful admission to AIM

Our initial public offering was a fitting recognition of our past successes and marked the beginning of our aspiration to be the leading public policy advisory firm in the world.

The successful listing has materially enhanced the Group's profile which supports our pursuit of new clients and high-quality talent. In addition, admission provides a platform for the Group to accelerate its proven acquisition strategy, combining its established and structured process for identifying, negotiating and integrating operating companies.

Group highlights

In 2021, the Group's core federal lobbying firms, including Crossroads Strategies, Forbes Tate Partners, and Alpine Group Partners, each saw significant organic revenue growth, expansion of key client relationships, and key new client wins.

Alpine Group Partners

2021 saw continued growth at Alpine Group Partners with the addition of several new Fortune 500 clients, including Accenture and Siemens Energy. Growth was especially robust in our expanding federal appropriations practice, which enjoyed several legislative successes in obtaining over $200 million in federal spending for clients and their key projects and programs. Other practice areas, especially in the technology, cyber and energy arenas also experienced growth with new and recurring clients. 

Crossroads Strategies

The successful retention of clients has been the unique strength of Crossroads Strategies for many years.  In 2021, that tradition continued and included average retainer increases, growth in consulting (non-lobbying) services revenue, and tremendously strong client referrals which supported new client wins across many sectors.

Key new clients included Eli Lilly, United States Steel, World Shipping Council, and the National Medal of Honor Museum. 

Forbes Tate Partners

Forbes Tate Partners' integrated lobbying and public affairs/campaigning businesses both continued to expand in 2021, with the lobbying business seeing a 28% increase in revenues, supported by deepened client relationships that lead to clients buying added capabilities.  Healthcare remains the firm's core area of strength as in years past, but recent growth was strongest in new areas such as fintech.  The firm's digital and grassroots campaign capabilities have all been significant drivers behind continued growth and deepening of client retention.

Seven Letter; O'Neill & Associates

Similarly, our public affairs and strategic communications divisions, anchored by Seven Letter and O'Neill & Associates, included the launch of Seven Letter Insights, a strategic research consultancy, a certified ESG practice, significant expansion of the corporate affairs offering (including financial communications) and significant client growth in the technology sector.   Additionally, Seven Letter enhanced its in-house creative offering to include website development and video production in addition to existing digital and design capabilities.

There is no question that the public policy challenges and opportunities of our clients require an increasingly multi-disciplined, integrated, public policy strategy - including traditional advocacy and policy expertise, deep research and insights, and sophisticated public mobilisation efforts - to succeed.  PPHC was conceived and built for this moment, and we're just getting started.

I sincerely thank each one of our colleagues and their families, our clients, partners, advisors and new public market investors. 

Stewart Hall

Chief Executive Officer

Financial review

Basis of preparation

The Company was admitted to trading on the AIM market of the London Stock Exchange on 16 December 2021 (the "IPO") and the Company was incorporated on 4 February 2021. The comparative figures, for the consolidated financial statements, presented in this annual report for the year ended 31 December 2021 are for Public Policy Holding Company, LLC and its subsidiary companies, the businesses of which were contributed to the Company immediately prior to the IPO. For the year ended 31 December 2021, the consolidated figures represent the results of the underlying business for the whole financial period before and after the IPO.  The financial statements have been prepared in accordance with US GAAP.

Revenue

The Group's total revenue for 2021 increased by more than 28.2% to $99.3 million (2020: $77.5 million) driven by a growing number of client engagements year-on-year (more than 730 total) and more services being purchased by clients resulting in an increase of 18% in high-value clients, as defined by billings equal or greater than $100,000 per annum.

Each of the Group's five operating units realised growth in net revenues and profits for the year.

The Group's growing reputation led to assignments on a number of high-profile cases during the period, including additional Fortune 500 clients, significant federal advocacy work on behalf of new and emerging sectors, and strength in our local and regional engagements (non-federal).

Normalised EBITDA

	2021	2020
Reported Profit Before Tax	(23,761,113)	(1,173,782)
Add:
Share-based accounting (ASC 718-10-S99-2) charge (non-cash)	27,609,214	-
Amortization expense - customer relationship (non-cash)	1,884,812	1,884,812
Adjusted Profit Before Tax	5,732,913	711,030
Add:
Actual bonus distributions	37,518,765	28,333,787
Less:
Normalised bonus payments	(11,400,644)	(7,664,813)
Normalised Adjusted Profit Before Tax	31,851,034	21,380,004
Add:
Interest Expense	51,520	45,072
Depreciation	127,833	109,969
Normalised EBITDA	32,030,387	21,535,045

Operating profit

During 2021, all pre-admission employee shareholders entered into executive employee agreements with the Company or its subsidiaries.  These employee shareholders sold approximately 14.6% of their shares in conjunction with the admission to AIM and retained the remaining 85.4% of their shares.  The retained shares are subject to a vesting schedule under which the shares held by each employee shareholder will vest in equal instalments on the first five anniversaries of the effective date of admission, provided that the shareholder remains continuously employed by the employer. This vesting schedule applies to all employees holding shares at the time of admission.  The employment agreements also contain certain provisions which enable cash derived from the sale of shares to be clawed back and forfeited on certain events of termination of employment.

The addition of the vesting provisions to previously issued shares creates a share-based accounting non-cash charge in accordance with accounting guidance under US GAAP (Accounting Standards Codification, 718-10-S99-2, compensation-stock compensation).  Based on the value of the Company at the time of admission ($197 million), and taking into account the 14.6% of pre-admission employee shares sold in 2021, this 2021 non-cash charge is $27.6 million.

This share-based accounting non-cash charge has no impact on either tax or Company operations.  An additional similar non-cash charge recorded relates to the amortization of customer relationship per ASC 805.

The Group started the financial year under review with 179 employees operating out of five offices. By end of year, this number had increased to 187 people. 

The Group's net finance costs for the year were $51K (2020: $45K).

Balance sheet and cash flow

The Group's net cash position as at 31 December 2021 was $17.8 million (2020: $5.9 million).

Following the IPO when the Company raised $15 million gross and $13.8 million net of fees and FX,the net cash raised has been used to strengthen the Group's balance sheet and provide resources for potential strategic acquisitions. The Group had no bank borrowings as of 31 December 2021.

Dividend

Annual results for the period are set out in the Consolidated Financial Statements. Effective on May 12, 2022, the Board of Directors of the Company declared a cash dividend in relation to the period from 16 December 2021, the date of IPO to 31 December 2021. The dividend is payable to the holders of record of all of the issued and outstanding shares of the Company's Common Stock as of the close of business on the record date, May 20, 2022. The aggregate amount of the dividend is $705,620, which equates to $0.0065 per share of Common Stock issued and outstanding on the record date. The ex-dividend date is May 19, 2022.  The dividend will be paid on June 20, 2022.

As stated in the Company's IPO Admission Document, the Directors anticipate that the Group will adopt a pay out ratio of up to 70 per cent. of the Group's adjusted net profit after tax, payable half yearly. The Directors intend that for the 2022 financial year the Group will pay an interim dividend and a final dividend in approximate proportions of one third and two thirds respectively, of the total annual dividend.

Outlook

Following successful admission to trading on AIM in December 2021 and a very strong end to the 2021 financial year, management expects further market share gains and revenue growth into 2022.

In addition to its organic growth potential driven by its unique and differentiated model, the Group has identified an attractive pipeline of strategic acquisition opportunities in US federal and state lobbying market, as well as in the adjacent strategic communications and public affairs market(s), in the US and internationally.

The Group has a clearly defined growth strategy and as set out at the time of IPO, management expects to deliver medium term organic revenue growth of between 5 per cent. and 10 per cent. per annum, excluding the potential positive impact of M&A activity or material hires. The Group continues to manage the business such that the ratio of personnel costs to revenue remains in the range of 45 per cent. to 55 per cent., excluding bonus payments. Following IPO, the Group has adopted a bonus policy whereby 25% of pre-bonus EBITDA will be paid as a cash bonus across the Group in total.

William Chess

Chief Financial Officer

Consolidated Balance Sheets

December 31, 2021 and 2020

	2021	2020
Assets
Current assets:
Cash	$18,035,641	$6,142,919
Accounts receivable, net	8,214,002	6,622,571
Note receivable - related party - short term	263,850	210,038
Prepaid expenses and other current assets	490,712	409,785
Total current assets	27,004,205	13,385,313
Note receivable - related party - long-term	-	208,250
Property and equipment, net	788,598	879,801
Operating lease right of use asset	15,907,571	15,793,416
Goodwill	44,893,532	44,893,532
Other intangible assets, net	12,877,567	14,762,379
Syndication costs	-	549,024
Other long-term assets	553,957	256,872
Total assets	$102,025,430	$90,728,587
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$8,329,355	$6,020,435
Income taxes payable	522,500	-
Amounts owed to related parties	6,696,795	4,665,667
Deferred revenue	1,942,536	1,502,176
Operating lease liability due within one year	3,374,724	2,775,557
Notes payable, current portion	20,664	23,083
Total current liabilities	20,886,574	14,986,918
Line of credit	-	1,361,875
Notes payable, long term	216,048	233,784
Deferred income tax liability	2,914,600	-
Operating lease liability, long term	15,262,878	15,473,276
Total liabilities	39,280,100	32,055,853
Stockholders' equity
Common stock, $0.001 par value, 1,000,000,000
shares authorized, 108,240,250 and 0 shares issued
and outstanding, respectively	108,240	-
Additional paid-in capital	86,892,903	-
Retained earnings	(24,255,813)	-
Members' equity	-	58,672,734
Total stockholders' equity	62,745,330	58,672,734
Total liabilities and stockholders' equity	$102,025,430	$90,728,587

Consolidated Statements of Operations

For the Years Ended December 31, 2021 and 2020

	2021	2020
Revenue	$99,336,460	$77,483,587
Expenses:
Personnel cost	44,070,612	38,341,767
Employee bonuses	17,626,133	12,476,284
General and administrative expenses	8,184,253	6,197,087
Occupancy expense	3,650,562	3,744,874
Depreciation and amortization expense	2,012,645	1,994,782
Profit bonuses	19,892,634	15,857,503
Total expenses before share-based
accounting (ASC 718-10-S99-2) charge	95,436,839	78,612,297
Income (loss) from operations before share-based
accounting (ASC 718-10-S99-2) charge	3,899,621	(1,128,710)
Share-based accounting (ASC 718-10-S99-2) charge	27,609,214	-
Loss from operations	(23,709,593)	(1,128,710)
Interest expense	51,520	45,072
Net loss before income taxes	(23,761,113)	(1,173,782)
Income tax expense	494,700	-
Net loss	$(24,255,813)	$(1,173,782)
Net loss per share attributable to common
stockholders, basic and diluted	$(0.24)	$-
Weighted average common shares outstanding,
basic and diluted	100,338,632	-

Consolidated Statements of Stockholders' Equity

For the Years Ended December 31, 2021 and 2020

			Additional			Total
	Common Stock		Paid-In	Members'	Retained	Stockholders'
	Shares	Amount	Capital	Equity	Earnings	Equity
Balance as of December 31, 2019	-	$ -	$ -	$27,719,577	$ -	$27,719,577
Acquisition of Alpine Group Partners, LLC	-	-	-	32,204,304	-	32,204,304
Debt conversion to equity	-	-	-	150,000	-	150,000
Distributions	-	-	-	(227,365)	-	(227,365)
Net loss	-	-	-	(1,173,782)	-	(1,173,782)
Balance as of December 31, 2020	-	-	-	58,672,734	-	58,672,734
Distributions to members	-	-	-	(444,235)	-	(444,235)
Shares issued due to conversion from LLC to C-Corporation	100,000,000	100,000	58,128,499	(58,228,499)	-	-
Issuance of common shares, net of commissions and fees of $1,634,554	8,240,050	8,240	13,357,206	-	-	13,365,446
Syndication costs	-	-	(4,797,076)	-	-	(4,797,076)
Income tax effect of conversion from LLC to C-Corporation	-	-	(2,942,400)	-	-	(2,942,400)
Holdings Distribution Discount	-	-	(4,462,540)	-	-	(4,462,540)
Share-based accounting (ASC 718-10-S99-2) charge	-	-	27,609,214	-	-	27,609,214
Net loss	-	-	-	-	(24,255,813)	(24,255,813)
Balance as of December 31, 2021	108,240,050	$108,240	$86,892,903	$ -	$(24,255,813)	$62,745,330

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2021 and 2020

	2021	2020
Cash flows from operating activities
Net loss	$(24,255,813)	$(1,173,782)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation	127,833	109,967
Amortization expense - customer relationship	1,884,812	1,884,815
Amortization of right of use assets	2,943,400	2,461,534
Provision for deferred income taxes	(27,800)	-
Share-based accounting (ASC 718-10-S99-2) charge	27,609,214	-
(Increase) decrease in
Accounts receivable, net	(3,267,547)	(595,828)
Other assets	(378,012)	(288,248)
Increase (decrease) in
Accounts payable and accrued expenses	2,546,171	3,400,282
Income taxes payable	522,500	-
Deferred revenue	1,879,225	849,605
Operating lease liability	(2,668,786)	(2,542,249)
Transactions with members/related parties	(2,276,974)	1,726,663
Net cash provided by operating activities	4,638,223	5,832,759
Cash flows from investing activities
Purchases of property and equipment	(36,630)	(23,910)
Net cash used in investing activities	(36,630)	(23,910)

	2021	2020
Cash flows from financing activities
Syndication costs and other stock issuance costs	(4,638,271)	(549,024)
Issuance of common stock	13,755,665	-
Net proceeds (payments) from line of credit and
notes payable	(1,382,030)	68,543
Distributions	(444,235)	(227,365)
Net cash provided by financing activities	7,291,129	(707,846)
Net increase in cash and cash equivalents	11,892,722	5,101,003
Cash and cash equivalents as of beginning of year	6,142,919	1,041,916
Cash and cash equivalents as of end of year	$18,035,641	$6,142,919
Supplemental disclosure of cash flow information
Cash paid for interest	$51,520	$101,828
Right of use assets obtained with lease liabilities	$3,057,555	$-
Income tax effect of conversion of LLC to C-Corporation	$2,942,400	$-
Holdings Distribution Discount	$4,462,540	$-
Commissions and fees paid through issuance of
common stock	$1,244,335	$-

NOTE 1  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation:

Public Policy Holding Company, Inc. ("PPHC-Inc.") was incorporated on February 4, 2021. From PPHC-Inc.'s incorporation until December 10, 2021 (the "Conversion Date"), all of the issued and outstanding shares of stock of PPHC-Inc. were owned by Public Policy Holding Company, LLC ("PPHC-LLC"), which (i) was organized as a Delaware limited liability company on July 1, 2014, and (ii) owned certain wholly-owned operating subsidiaries, all organized as Delaware limited liability companies (the "Subsidiaries," and collectively with PPHC-Inc., the "Company"). On the Conversion Date, PPHC-LLC contributed and assigned substantially all of its assets and liabilities (including all of the Subsidiaries, but excluding certain specified assets and liabilities) to PPHC-Inc. in exchange for the issuance by PPHC-Inc. of 100,000,000 shares (the "Contribution Shares") of Common Stock, par value $0.001 per share ("Common Stock") of PPHC-Inc. Pursuant to a formula approved by the Executive Board and General Board of PPHC-LLC (the "Waterfall"), PPHC LLC then liquidated and distributed the Contribution Shares to each of PPHC-LLC's owners who (other than The Alpine Group, Inc.), in turn, distributed such shares to their respective owners in accordance with the Waterfall (collectively, the "Company Conversion").

The Company provides governmental and public affairs consulting services exclusively in the United States of America ("U.S."). 

The Company has prepared the accompanying consolidated financial statements in conformity with generally accepted accounting principles in the United States of America ("GAAP"). Such consolidated financial statements reflect all adjustments that are, in management's opinion, necessary to present fairly, in all material respects, the Company's financial position, results of operations and cash flows, and are presented in U.S. Dollars. All material intercompany transactions and balances have been eliminated in consolidation.

Principles of Consolidation:

The consolidated financial statements include all of the accounts of the entities listed below:

Parent company:

  Public Policy Holding Company, Inc.

Wholly owned operating subsidiaries:

  Crossroads Strategies, LLC

  Forbes Tate Partners, LLC

  Blue Engine Message & Media, LLC, doing business as Seven Letter

  O'Neill & Partners LLC, doing business as O'Neill & Associates

  Alpine Group Partners, LLC

On January 1, 2020, the Company formed Seven Letter ONA to do business in the State of Massachusetts. Revenue and expense from Seven Letter ONA will be allocated to Seven Letter and O'Neill & Associates.

Initial Public Offering:

On December 16, 2021, PPHC-Inc. completed an initial public offering and placement ("IPO") of its shares of Common Stock, and the admission of Common Stock to trading on the AIM market of the London Stock Exchange.

The PPHC-LLC Limited Liability Company Agreement ("LLC Agreement") provided for the payment of a "Holdings Distribution Discount" in connection with a sale or IPO of the Company, amounting to $4,462,540 (excluding an interest accrual which is being waived). The Holdings Distribution Discount represents the difference between an operating subsidiary paying three percent of its revenues annually to PPHC-LLC (which has historically been paid by all operating subsidiaries other than Crossroads Strategies, LLC and Forbes Tate Partners, LLC), and each of Crossroads Strategies, LLC and Forbes Tate, LLC, which, as the founding businesses acquired by PPHC-LLC, have paid approximately five percent of their respective revenues annually to PPHC-LLC. Historically, PPHC-LLC and its members viewed this obligation of PPHC-LLC (triggered by the IPO) as an obligation to refund Crossroads Strategies, LLC and Forbes Tate, LLC, their relative overpayments (compared to the other operating subsidiaries) because had those overpayments not been made to PPHC-LLC, those amounts could have been paid as additional bonuses or distributions to the owners of Crossroads Strategies, LLC and Forbes Tate, LLC. This obligation of PPHC-LLC has been contributed and assigned to and assumed by the Company as part of the Contribution Agreement entered into in connection with the Company Conversion. Upon the Company's payment of the Holdings Distribution Discount to Crossroads Strategies, LLC and Forbes Tate, LLC, it is anticipated that Crossroads Strategies, LLC and Forbes Tate, LLC will, in turn, distribute such amounts to their respective owners including but not limited to Stewart Hall and Zachary Williams. As of December 31, 2021, the Holdings Distribution Discount of $4,462,540 is included in the amounts owed to related parties in the Company's Consolidated Balance Sheets. 

In addition, certain assets and liabilities were not contributed by PPHC-LLC to the Company as part of the Company Conversion.  As of December 31, 2021, the net amount owed to the PPHC-LLC members approximates $2,234,000 and is included in amounts owed to related parties in the Company's Consolidated Balance Sheets.

During 2021, all the ultimate owners of PPHC-LLC ("Group Executives") entered into Executive Employment Agreements. The Group Executives sold some of their Common Stock in conjunction with the IPO ("Liquidated Pre-IPO Shares") but retained the majority of their shares ("Retained Pre-IPO Shares"). The Retained Pre-IPO Shares are subject to a vesting schedule under which the Common Stock held by each Group Executive will vest in equal installments on the first five anniversaries of the effective date of the IPO, provided that the Group Executive remains continuously employed by the employer; this vesting schedule applies to all the Company's employees holding Common Stock at the time of the IPO. In the event that a Group Executive's employment terminates (other than on death or "disability", or by the employer without "cause", or by the Group Executive for what is deemed to be for a "good reason") then the unvested proportion of the Retained Pre-IPO Shares which have not vested, will not vest and will be automatically forfeited and clawed back as of the date of such termination. In the event a Group Executive's employment terminates on death or "disability," or by the employer without "cause," or by the Group Executive for what is deemed to be "good reason," then all unvested shares will vest automatically as of the date of such termination. The Executive Employment Agreements also contain certain provisions which enable cash derived from the sale of Liquidated Pre-IPO Shares and Retained Pre-IPO Shares that have vested to be clawed back and forfeited on certain events of termination of employment or breaches of certain provisions of the Executive Employment Agreements. Pursuant to the Executive Employment Agreements for Group Executives employed by Alpine Group Partners, a pro-rata portion of the Retained Pre-IPO Shares held by (and the Liquidated Pre-IPO Shares sold by) The Alpine Group Inc. are subject to vesting, forfeiture and claw back based on the employment of certain of those Group Executives.

The addition of the vesting provisions to previously issued shares creates a share-based accounting charge in accordance with the accounting guidance in Accounting Standards Codification ("ASC") 718-10-S99-2, Compensation-Stock Compensation. See Note 7. 

Revenue Recognition:

The Company generates the majority of its revenue by providing consulting services related to lobbying and public affairs. In determining the method and amount of revenue to recognize, the Company has to make judgments and estimates. Specifically, complex arrangements with nonstandard terms and conditions may require management's judgment in interpreting the contract to determine the appropriate accounting, including whether the promised services specified in an arrangement are distinct performance obligations and should be accounted for separately, and how to allocate the transaction price, including any variable consideration, to the separate performance obligations. When a contract contains multiple performance obligations, the Company allocates the transaction price to each performance obligation based on its estimate of the stand-alone selling price. Other judgments include determining whether performance obligations are satisfied over-time or at a point-in-time and the selection of the method to measure progress towards completion.

The Company's general practice is to establish an agreement with a client with a fixed monthly payment at the beginning of each month for the month's service to be performed. Most of the consulting service contracts are based on one of the following types of contract arrangements:

· Fixed-fee arrangements require the client to pay a fixed fee in exchange for a predetermined set of professional services. The Company recognizes revenue at the beginning of the month for that month's services.

· Additional services include items such as 1) advertisement placement and management, 2) video production, and 3) website development, in which third-party companies may be engaged to achieve specific business objectives. These services are either in a separate contract or within the fixed-fee consulting contract, in which the Company usually receives a fixed 15% markup on the cost incurred by the Company. The Company recognizes revenues earned to date in an amount that is probable or unlikely to reverse and by applying the proportional performance method when the criteria for revenue recognition is met. Any out-of-pocket administrative expenses incurred are billed at cost. 

Certain services provided by the Company include the utilization of a third-party in the delivery of those services.  These services are primarily related to the production of an advertising campaign or media buying services.  The Company has determined that it acts as an agent and is solely arranging for the third-parties to provide services to the customer.  Specifically, the Company does not control the specified services before transferring those services to the customer, and is not primarily responsible for the performance of the third-party services, nor can the Company redirect those services to fulfill any other contracts.  The Company does not have discretion in establishing the third-party pricing in its contracts with customers.  For these performance obligations for which the Company acts as an agent, the Company records revenue as the net amount of the gross billings less amounts remitted to the third-party.

The following table provides disaggregated revenue by revenue type for the periods ended December 31:

	2021	2020
Lobbying revenue	$64,039,856	$51,428,529
Public affairs revenue	35,296,604	26,055,058
Total revenue	$99,336,460	$77,483,587

See the Segment Reporting Note 10 for a description of the principal activities, by reportable segment, from which the Company generates revenue.

As of January 1, 2020, the accounts receivable, net and deferred revenue was $6,026,743 and $652,571, respectively. The following table provides information about receivables, contract assets and contract liabilities from contracts with customers as of December 31:

	2021	2020
Accounts receivable, net	$  8,109,353	$  6,534,464
Other receivables	104,649	88,107
Contract liabilities (deferred revenue)	1,942,536	1,502,176

Contract liabilities relate to advance consideration received from customers under the terms of the Company's contracts primarily related to retainer fees and reimbursements of third-party expenses, both of which are generally recognized shortly after billing.  The deferred revenue of $1,502,176 and $652,571 from December 31, 2020 and 2019 was recognized as revenue in 2021 and 2020, respectively. 

Cash and Cash Equivalents:

The Company considers all cash investments with original maturities of three months or less to be cash equivalents. At times, the Company maintains cash accounts that exceed federally insured limits, but management does not believe that this results in any significant credit risk.

Accounts Receivable:

The Company provides for an allowance for doubtful accounts based on management's best estimate of possible losses determined principally on the basis of historical experience and specific allowances for known troubled accounts, if needed. Accounts are generally considered past due after the contracted payment terms, which are generally net 30 day terms. All accounts or portions thereof that are deemed to be uncollectible or that require an excessive collection cost are written off to the allowance for doubtful accounts. The Company determined that no allowance for doubtful accounts was necessary as of December 31, 2021. On December 31, 2020, the balance of allowance for doubtful accounts was approximately $50,000.

Unbilled revenue:

Unbilled revenue represents earned revenue and reimbursable costs that are billed to the customers in the subsequent month.  Unbilled revenue was de minimis for the years ended December 31, 2021 and 2020.

Leases:

A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company accounts for its leases in accordance with the guidance in Accounting Standards Codification ("ASC") 842 ("ASC 842"). Substantially all of the leases in which the Company is the lessee are comprised of real estate property for remote office spaces and corporate office space. Substantially all of the leases are classified as operating leases.

As of December 31, 2021 and 2020, the Company had approximately $15,908,000 and $15,793,000, respectively, of operating lease ROU assets and $18,638,000 and $18,249,000, respectively of operating lease liabilities on the Company's Consolidated Balance Sheets. The Company has elected not to recognize right-of-use ("ROU") assets and lease liabilities arising from short-term leases, leases with initial terms of twelve months or less, or equipment leases (deemed immaterial) on the Consolidated Balance Sheets.

These leases may contain terms and conditions of options to extend or terminate the lease, which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a significant probability that the Company will exercise the option. If these criteria are not met, the options are not included in the Company's ROU assets and lease liabilities.

As of December 31, 2021, these leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company's ability to incur additional financial obligations.

The discount rate for operating leases was based on market rates from a bank for obligations with comparable terms effective at the lease inception date. The following table presents lease costs, future minimum lease payments and other lease information as of December 31:

2022..................................................................................................................	$4,332,308
2023.................................................................................................................	3,908,822
2024.................................................................................................................	2,975,577
2025.................................................................................................................	3,047,668
2026.................................................................................................................	3,026,199
Thereafter..........................................................................................................	4,417,191
Total future minimum lease payments	21,707,765
Amount representing interest	(3,070,163)
Present value of net future minimum lease payments	$18,637,602

Lease Cost

	Year ending December 31:
	2021	2020
Operating lease cost (cost resulting from lease payments)	$3,829,749	$3,415,763
Variable lease cost (cost excluded from lease payments)	171,958	169,877
Sublease income	(400,890)	(422,568)
Net lease cost	$3,600,817	$3,163,072
Operating lease - operating cash flows (fixed payments)	$3,938,149	$3,679,277
Weighted average lease term - operating leases	5.1 years	6.6 years
Weighted average discount rate - operating leases	3.98%	4.90%

The Company subleases office space to several third parties under separate sublease agreements. Below is the future schedule of sublease income from subtenants as of December 31, 2021:

2022...................................................................................................................	$264,862
2023...................................................................................................................	30,081
Total	$294,943

Property and equipment:

Property and equipment consists of furniture, equipment and leasehold improvements and is carried at cost less accumulated depreciation. Depreciation is provided generally on a straight-line method over the estimated useful lives of the related assets ranging from 5 to 15 years.

Business Combination

In a business combination, the acquisition method of accounting requires that the assets acquired and liabilities assumed be recorded as of the date of the acquisition at their respective fair values with limited exceptions. Assets acquired and liabilities assumed in a business combination that arise from contingencies are generally recognized at fair value. If fair value cannot be determined, the asset or liability is recognized if probable and reasonably estimable; if these criteria are not met, no asset or liability is recognized. Transaction costs are expensed as incurred. The operating results of the acquired business are reflected in the Company's consolidated financial statements after the date of acquisition.

Goodwill and indefinite-lived intangible assets:

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in business combinations and is allocated to the appropriate reporting unit when acquired. Acquired intangible assets are recorded at fair value.

Goodwill is evaluated for impairment annually during the fourth quarter, or more frequently if an event occurs, or circumstances change that could more likely than not reduce the fair value of a reporting unit below its carrying value. Goodwill is typically assigned to the reporting unit, which consolidates the acquisition. Components within the same reportable segment are aggregated and deemed a single reporting unit if the components have similar economic characteristics. As of December 31, 2021, the Company's reporting units consisted of Lobbying Consulting and Public Affairs Consulting. Goodwill is evaluated for impairment using either a qualitative or quantitative approach for each of the Company's reporting units. Generally, a qualitative approach is first performed to determine whether a quantitative goodwill impairment test is necessary. If management determines, after performing an assessment based on qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative goodwill impairment test would be required. The quantitative test for goodwill impairment is performed by determining the fair value of the related reporting units. Fair value is measured based on the discounted cash flow method, which requires management to estimate a number of factors for each reporting unit, including projected future operating results, anticipated future cash flows and discount rates. Management has performed its evaluation and determined the fair value of each reporting unit is greater than the carrying amount and, accordingly, the Company has not recorded any impairment charges related to goodwill for the years ended December 31, 2021 and 2020.

Indefinite-lived intangible assets are tested for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that could more likely than not reduce the fair value below its carrying value. The Company's indefinite-lived intangible assets consist of trademarks acquired through various business acquisitions. The Company has the option to first assess qualitative factors to determine whether events or circumstances indicate it is more likely than not that the fair value of the trademarks is greater than the carrying amount, in which case a quantitative impairment test is not required. Management has performed its evaluation and determined that the trademarks are not impaired for the years ended December 31, 2021 and 2020. 

Customer relationship asset:

The Company's definite-lived intangible asset consists of customer relationships that have been acquired through various acquisitions. The Company amortized these assets over their estimated useful lives. 

Impairment of long-lived assets :

Long-lived assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for an amount by which the carrying amount of the asset exceeds the fair value of the asset.  The Company has not recorded any impairment charges related to long-lived assets for the years ended December 31, 2021 and 2020.

Syndication costs:

Deferred offering costs consist primarily of consulting fees related to the initial public offering (IPO). Prior to the IPO, all deferred offering costs were capitalized and included in the consolidated balance sheets. During December 2021, these costs totaling approximately $4,797,000 were recorded as a reduction to stockholders' equity. The syndication costs included in the consolidated balance sheets as of December 31, 2020, were approximately $549,000.

Deferred revenue:

Deferred revenue represents prepayment by the customers for services that have yet to be performed. As of December 31, 2021 and 2020, deferred revenue was approximately $1,943,000 and $1,502,000, respectively.  Deferred revenue is expected to be recognized as revenue within a year.

Marketing costs:

The Company expenses marketing costs as incurred. Marketing expense for the years ended December 31, 2021 and 2020 was approximately $102,000 and $52,000, respectively.

Income taxes:

Prior to the Conversion Date, PPHC-LLC was a limited liability company whereby the tax attributes were passed through to and reported on the members of PPHC-LLC's tax returns.

After the Conversion Date, the Company utilizes the asset and liability method in the Company's accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets when realization of the tax benefit is uncertain.

A valuation allowance is recorded, if necessary, to reduce net deferred taxes to their realizable values if management believes it is more likely than not that the net deferred tax assets will not be realized.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Profit bonuses:

Annual bonus payments are paid as compensation for services to senior executives and employees based on the profits of the Company.

Estimates:

The preparation of consolidated financial statements in conformity wit h GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Share-based accounting charge:

The Company accounts for its share-based accounting (ASC 718-10-S99-2) charge using the fair value method.  The fair value method requires the Company to estimate the grant-date fair value of its share-based awards and amortize this fair value to expense over the requisite service period or vesting term.  For restricted and nonvested stock awards, the grant-date fair value is based upon the market price of the Company's common stock on the date of the grant.  The Company records forfeitures as they occur.

Segment information:

GAAP requires segmentation based on an entity's internal organization and reporting of revenue and operating income based upon internal accounting methods commonly referred to as the "management approach." Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), or decision making group, in deciding how to allocate resources and in assessing performance. The Company's CODM is its Chief Executive Officer. The Company's operations are conducted in two reportable segments. These segments consist of Lobbying Consulting and Public Affairs Consulting.

Basic and diluted earnings (loss) per share:

The Company computes earnings (loss) per share in accordance with ASC 260, Earnings per Share, which requires presentation of both basic and diluted earnings per share on the face of the consolidated statements of operations. Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. The Company has no potential dilutive instruments and accordingly, basic and dilutive earnings (loss) per share are equal.

Fair value of financial instruments:

The carrying values of cash, accounts receivable, and accounts payable and accrued expenses at December 31, 2021 and 2020 approximated their fair value due to the short maturity of these instruments.

Reclassification:

Certain 2020 balances have been reclassified to conform to the 2021 presentation.  These reclassifications had no impact on the total net assets of the Company.

Subsequent events:

Management has evaluated the subsequent events for disclosure in these consolidated financial statements.

NOTE 2  ACQUISITION OF ALPINE GROUP PARTNERS, INC.

On January 1, 2020, Alpine Group Inc. ("Alpine") contributed its assets to the Company for an ownership interest in the Company. No cash was paid in this transaction. The Company acquired Alpine primarily for their customer relationships and key employees to continue to expand the services provided by the Company and contributions to the Company's long term growth and profitability. The following table summarizes the consideration paid and the amounts of identified assets acquired, and liabilities assumed:

Identified assets acquired and liabilities assumed
Goodwill	$20,461,304
Tradename	1,383,000
Customer relationship	10,360,000
Right of use assets	2,458,267
Lease liability	(2,458,267)
Total identifiable net assets	$32,204,304

The identified definite-lived intangible assets were as follows:

Definite-lived intangible assets	Weighted-average useful life (in years)	Amount
Customer relationship	8	$10,360,000

The fair value of customer relationships was determined using the income approach, which requires management to estimate a number of factors for each reporting unit, including projected future operating results, anticipating future cash flows and discount rates.  The primary factors that contributed to the goodwill recognized from the Alpine acquisition include the key employees of Alpine combined with additional synergies expected from increasing the Company's service capabilities. None of the goodwill acquired in the Alpine acquisition is deductible for income tax purposes. 

NOTE 3  RELATED PARTY TRANSACTIONS

On November 1, 2018, PPHC-LLC advanced $833,000 to the original members of Blue Engine Message & Media, LLC for the purchase of the ownership interest of JDA Frontline Partners, LLC in the form of a promissory note. The note matures on October 31, 2022, and requires the borrowers to make 16 quarterly installment payments of $52,063 commencing on February 15, 2019. Interest on the note is the London Interbank Offered Rate ("LIBOR") daily floating rate plus 2.4% (2.5% as of December 31, 2021). The note receivable balance as of December 31, 2021 and 2020, was approximately $260,000 and $416,000, and interest receivable of approximately $4,000 and $2,000, respectively, which are recorded in note receivable - related party. Total interest income from these notes receivable approximated $9,000 and $16,000 for the years ended December 31, 2021 and 2020, respectively. 

As of December 31, 2021, the amounts owed to related parties include the Holding Distribution Discount of approximately $4,463,000 and the amount owed to PPHC-LLC members as part of the Company Conversion of approximately $2,234,000. See Note 1.

As of December 31, 2020, the amounts owed to related parties includes accrued bonuses owed to operating subsidiary members of approximately $4,557,000 as well as funds advanced from the owners of contributing subsidiaries of approximately $109,000.  These amounts were paid in 2021. 

NOTE 4:  GOODWILL AND INTANGIBLE ASSETS

Goodwill and Tradenames

The Company's indefinite-lived assets consist of goodwill and tradenames as of December 31. 

	2021	2020
Goodwill	$  44,893,532	$  44,893,532
Tradenames	3,813,000	3,813,000
Total	$  48,706,532	$  48,706,532

As of December, 31, 2021 and 2020, there have been no impairments to goodwill or tradenames.  During 2020, goodwill increased by $20,461,304 as a result of the acquisition of Alpine.  See Note 2.

Goodwill is allocated to each segment as follows, as of December 31:

	2021	2020
Goodwill
Lobbying consulting	$26,859,782	$26,859,782
Public affairs consulting	18,033,750	18,033,750
Total	$44,893,532	$44,893,532

Intangible Assets

The Company's definite lived intangible assets consist of customer relationship assets acquired through various acquisitions. The estimated useful lives for these assets range from 7 to 9 years. The cost and accumulated amortization of the Company's customer relationships is as follows as of December 31:

	2021	2020
Cost	$15,320,800	$15,320,800
Accumulated Amortization	(6,256,233)	(4,371,421)
Total, net	$9,064,567	$10,949,379

Amortization expense for customer relationship assets approximated $1,885,000 for 2021 and 2020.

The approximate estimated future amortization expense for the next five years is as follows:

	Amortization
2022........................................................................................................................	$1,885,000
2023........................................................................................................................	1,674,000
2024........................................................................................................................	1,463,000
2025........................................................................................................................	1,447,000
2026........................................................................................................................	1,301,000

NOTE 5  LINE OF CREDIT AND NOTES PAYABLE

A)  Line of credit

The Company had a $2,000,000 revolving line of credit, which was secured by all business assets. As a sub-facility under the line, standby letters of credit could be issued up to $750,000 to secure office leases. During 2021, the Company repaid the outstanding balance on the line of credit and closed the line of credit. As of December 31, 2020, the outstanding balance on the line of credit was approximately $1,362,000. Interest on the line of credit was at LIBOR's daily floating rate plus 2.5%. Interest expense on the line of credit for the years ended December 31, 2021 and 2020 was approximately $41,000 and $24,000, respectively.

B) Note payable - bank

In January 2018, the Company obtained a $300,000 loan from a national bank. The loan required equal monthly principal payments of $12,500 plus interest on the unpaid balance. The loan was paid in full in 2020.

C) Note payable - landlord

The Company executed a lease amendment on March 23, 2018, and received a loan of approximately $316,000 to fund certain tenant improvements. The Company shall repay the loan in equal monthly principal and interest installments over the lease term at an interest rate of 8%, with the final payment due on March 1, 2029. Notwithstanding the foregoing, the Company may submit a notice to the landlord to prepay the outstanding balance upon terms to be agreed upon by the landlord and the Company. The balance on the loan as of December 31, 2021 and 2020, was approximately $237,000 and $257,000, respectively.  Interest expense on the note payable - landlord for the years ended December 31, 2021 and 2020 was approximately $19,000 and $21,000, respectively.

As of December 31, 2021, the only outstanding long-term debt is the note payable - landlord and the future maturities of this note payable at December 31 is as follows:

2022.........................................................................................................................	$20,664
2023.........................................................................................................................	27,074
2024.........................................................................................................................	29,321
2025.........................................................................................................................	31,755
2026.........................................................................................................................	34,390
Thereafter.................................................................................................................	93,508
Total	$236,712

NOTE 6  INCOME TAXES

Prior to December 10, 2021, the net income (loss) related to the Company's operations were reported as part of a partnership income tax return for federal and state income tax purposes. Because the partnership entity was not subject to income tax at the Company level, no provision for income taxes was required for periods prior to December 10, 2021. 

Due to the Company Conversion that occurred on December 10, 2021, an initial net deferred tax liability was recorded in conjunction with the Company's operations that would be taxable at the corporate entity level. An initial deferred tax liability in the amount of $2,942,400 was recorded, with a corresponding adjustment to stockholders' equity.

The Company recorded the following income tax expense (benefit) for the period December 10, 2021 through December 31, 2021.

Current tax expense:
Federal	$375,100
State	147,400
	522,500
Deferred tax expense (benefit):
Federal	$(21,600)
State	(6,200)
	(27,800)
Total Provision for Income Taxes:	$494,700

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  None of the goodwill that is reported on the Consolidated Balance Sheets as of December 31, 2021 and 2020, is deductible for income tax purposes.

Significant components of the Company's deferred tax assets and liabilities are as follows as of December 31, 2021:

Deferred income tax assets:
Other assets	$40,600
ASC 842 Lease liability	5,036,200
Total deferred income tax assets	5,076,800
Deferred income tax liabilities:
Property and equipment	(213,100)
Intangible assets	(3,479,800)
Right of use asset	(4,298,500)
Total deferred income tax liabilities	(7,991,400)
Total Net Deferred Tax Liability:	$(2,914,600)

A reconciliation for the difference between actual income tax expense (benefit) compared to the amount computed by applying the statutory federal income tax rate to net loss before income tax of ($25,778,400) for the period between December 10, 2021 and December 31, 2021, is as follows:

	December 10, 2021 - December 31, 2021
	Amount	% of Pretax Earnings
Federal income tax benefit at statutory rate	$(5,413,500)	21.0
State income taxes, net of federal income tax benefit	(1,552,300)	6.0
Nondeductible share-based accounting charge	7,460,500	(28.9)
Total Provision for Income Taxes	$494,700	(1.9)

As of December 31, 2021, there are no known items that would result in a material liability related to uncertain tax positions, as such, there are no unrecognized tax benefits. The Company's policy is to recognize interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2021, the Company had no accrued interest or penalties related to uncertain tax positions.  The Company's 2021 tax year is open under the statute of limitations for examination by the taxing authorities.

NOTE 7  STOCKHOLDERS' EQUITY AND SHARE-BASED ACCOUNTING CHARGE

As of December 31, 2021, the authorized capital of the Company consists of 1,100,000,000 shares of capital stock, $0.001 par value per share, of which 1,000,000,000 shares are designated as common stock and 100,000,000 shares are designated as preferred stock.  There are no shares of preferred stock outstanding.

As discussed in Note 1, during 2021 the Company entered into Executive Employment Agreements with Group Executives.  As a result, the addition of the vesting provisions to previously issued shares created a share-based accounting charge in accordance with the accounting guidance in ASC 718-10-S99-2, Compensation-Stock Compensation.  As a result, the Company recorded a share-based accounting (ASC 718-10-S99-2) charge of $27,609,214 in 2021.

As of December 31, 2021, the total number of Liquidated Pre-IPO Shares subject to the clawback provisions totaled 14,463,713.  As of December 31, 2021, there were 85,536,287 Retained Pre-IPO Shares subject to vesting requirements and none of these shares were fully vested.  The weighted-average grant date fair value of these shares was $1.82 as of December 31, 2021.  As of December 31, 2021, the unrecognized compensation cost from these restricted shares was approximately $154,429,000, which is expected to be recognized over a weighted-average period of 5 years. 

During 2021, the Company adopted the Omnibus Incentive Plan, under which Options (both nonqualified options, and incentive stock options subject to favorable U.S. income tax treatment), stock appreciation rights, restricted stock units, restricted stock, unrestricted stock, cash-based awards and dividend equivalent rights may be issued.  As of December 31, 2021, no awards were outstanding under the Omnibus Incentive Plan.

NOTE 8  RETIREMENT PLAN

Effective January 1, 2020, the Company established the Public Policy Holding Company, LLC 401(k) Plan ("PPHC Plan"). The PPHC Plan covers employees that reach certain age and length of service requirements. Eligible employees can contribute into the plans through salary deferral. The PPHC Plan does not have any employer contribution.

NOTE 9  CONCENTRATION OF CREDIT RISK

Geographic location

Most of the Company's assets are located in the Washington D.C. metropolitan area. Therefore, the Company is subject to certain economic risks resulting from the majority of its revenue being derived from one geographic location.

NOTE 10  SEGMENT REPORTING

As of December 31, 2021, the Company has two reportable segments; Lobbying Consulting and Public Affairs Consulting.  Lobbying Consulting services include federal and state advocacy, strategic guidance, political intelligence and issue monitoring.  Public Affairs Consulting services include crisis communications, community relations, social and digital podcasting, public opinion research, branding and messaging, relationship marketing and litigation support.

Corporate is primarily comprised of selling, general and administrative expenses.  These expenses include corporate office expenses and certain other centrally managed expenses that are not fully allocated to operating divisions, salaries, annual bonuses and other miscellaneous benefits for corporate office employees, financial statement audits and legal, information technology and other consulting services that are engaged and managed through the corporate office, and rental expense for properties occupied by corporate office employees.

The Company measures the results of its segments using, among other measures, each segment's net revenue and operating income, which includes certain corporate overhead allocations. Information for the Company's segments, as well as for corporate and support, including the reconciliation to income (loss) from operations is provided in the following tables, as of December 31:

	2021	2020
Revenue
Lobbying consulting	$64,039,856	$51,428,529
Public affairs consulting	35,296,604	26,055,058
Total	$99,336,460	$77,483,587

	2021	2020
Income (loss) from operations
Lobbying consulting	$4,808,030	$3,284,118
Public affairs consulting	878,878	(1,667,957)
Share-based accounting (ASC 718-10-S99-2) charge	(27,609,214)	-
Corporate	(1,787,287)	(2,744,871)
Total loss from operations	$(23,709,593)	$(1,128,710)

	2021	2020
Depreciation and amortization
Lobbying consulting	$1,728,875	$1,728,874
Public affairs consulting	202,432	184,328
Corporate	81,338	81,580
Total depreciation and amortization	$2,012,645	$1,994,782

 

END

 

 

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