Half-year Results

Strategic execution delivers positive financial and operational progress; full year expectations affirmed

Public Policy Holding Company, Inc., the leading government relations and public affairs group of companies providing a comprehensive range of advisory services, today announces its unaudited interim results for the six months ended 30 June 2024 ("H1 2024" or the "Period").

Financial Highlights

• H1 revenue increased 8% to $71.1m (H1 2023: $65.7m), with organic growth contributing 1.2% and the balance driven by two earnings accretive acquisitions completed in the Period.
• Underlying EBITDA of $17.4m, up 3%, was achieved at a 24.5% margin. This margin performance was achieved after the Group invested $1.8m into M&A advisory costs and further incremental investment in Concordant.
• Underlying Profit after Tax of $13.2m is up 4% (H1 2023: $12.7m) with an increase in finance costs offset by a more favourable effective tax rate.
• EPS of $0.113 was down 1%, primarily as a result of the average share count increasing by 5% (or 6% on a fully diluted basis).
• The Group's balance sheet remains robust with strong free cashflow of $6.0m (H1 2023: $1.8m), enabling strategic progress via organic investment and earnings enhancing M&A.
• Net Debt of $28.3m (H1 2023: $9.1m) reflects a prudent leverage ratio and the deployment of $23.7m to fund the H1 acquisitions.
• The Board retains strong confidence in the Group's outlook and has declared an Interim Dividend of $0.047 per Common Outstanding Share, up 2% from last year's $0.046.

Operational Highlights

• The Period showcases the Group's ability to successfully execute its stated growth strategy, with ten operating companies providing an enhanced complementary range of services to a now global client base:

o Acquisition of London-based Pagefield, broadening the Group's operational presence outside of the US for the first time and providing significant revenue opportunity via the referral to and from the pre-existing Group.

o Acquisition of California-based Lucas Public Affairs ("LPA"), expanding the Group's presence in a state that is characterised by a highly regulatory environment and would register as the world's fifth largest economy.

o Integration of LPA has completed and the integration of Pagefield is being delivered as expected, with both companies already benefitting from client referrals via the wider PPHC network.

• Revenue diversification further enhanced with the top 10 Group clients representing 7.6% of revenue in H1 2024 versus 8.4% at the end of FY23 and 10.0% for FY22.
• By segment:

o Government Relations grew strongly at 8% (4% organically) while Public Affairs decreased by 6% (13% organically) as a consequence of a reduction in project-based work due to pending elections and economic concerns. Diversified Services (Research and Compliance) grew strongly at 97% (32% organically), albeit from a lower base.

o The revenue share of Government Relations remained stable at 71% (H1 2023: 71%); Public Affairs decreased marginally to 22% (H1 2023: 25%); and Diversified Services grew to 7% (H1 2023: 4%).

• A broadening client base of c.1,200 Group clients is supported by sustained high retention rates, with the Group directly representing almost half of the Fortune 100 and a quarter of the Fortune 500, in addition to many more via trade associations.
• The quality of PPHC's operating companies continues to be reflected in the 2024 Lobbying Disclosure Act rankings, with Group agencies, when aggregated, topping the rankings as the US market leader in both Q1 and Q2 2024, as well as for the previous 14 consecutive quarters.

Current Trading and Outlook

• The performance delivered in H1 2024 has set the Group up well for the remainder of the year and it remains on track to meet full year market expectations, with Underlying EBITDA margin for H2 2024 expected to be at or slightly above the H1 2024 level.
• The focus continues to be on driving client retention rates, new business generation following the outcomes of elections in the US and UK, and the continued cross-selling of services across the Group's broad operating company base to support organic growth prospects.
• The market for public affairs and professional lobbying services in key geographies remains fragmented and the Board continues to view the Group as a natural consolidator with favourable bipartisan positioning.
• The pipeline of acquisition opportunities under development in the US, UK and Mainland Europe remains strong in an active market for the government relations and strategic communications sectors. The Group is actively seeking to expand its portfolio of operating companies internationally with strategically and financially attractive opportunities while adding complementary specialisations.
• The Board remains confident in the ongoing prospects for the Group and reiterates its medium-term guidance to achieve:

o organic revenue growth between 5% and 10%;

o incremental growth from future M&A; and

o Underlying EBITDA margin between 25% and 30%.

Stewart Hall, CEO of PPHC, commented:

"I am pleased with the progress we have achieved in the first six months of the year as we continued to acquire excellent businesses complementing our wider growth strategy. We began our international expansion through the acquisition of Pagefield, giving us a foothold in the UK, while all ten of our operating companies are well positioned to benefit from increasing demand for their services as new governments and administrations are formed around the world, this year and next. Our ability to deliver organic growth in a period of impending elections is testament to the diversity of our revenue base and our high client retention rates.

"We have an exciting and robust M&A pipeline, both in the US and internationally, and are confident in our ability to deploy more capital to further accelerate our growth trajectory. I look forward to updating shareholders on our continued progress in the months ahead."

Operational Review

Introduction

The Group continued to make good progress in the first half of the year with organic growth supplemented by two earnings accretive acquisitions. With the Group's first international acquisition in Pagefield, we are closer to achieving our mission to provide effective government relations and advocacy services at a scale and sophistication level that has not previously been achieved, with professionalism and ever-broadening geographical reach.

Clients

PPHC provides a comprehensive range of government relations and public affairs services to its clients. As of 30 June 2024, the Group had c.1,200 clients. Every year around 75% of these clients renew their relationship with the Group, leading to revenue retention of c.85%. These numbers tend to be higher in our Government Relations and Diversified Services divisions, while lower in Public Affairs - where more work is done on a project basis.

In line with the trend we reported in 2023, we continued to see our operating divisions develop at different paces, with Government Relations - the largest of the Group's three divisions - increasing at 8%, of which 4% was organic, setting the Group up well for the remainder of the year. All three of the Group's lobbying firms, which sit within this division, maintained their consolidated number one position in the listing of Federal lobbyists, as according to quarterly and annual disclosures required by US Federal law and available to the public. Public Affairs decreased 6% (or 13% on an organic basis), primarily a result of reduced project work owing to uncertainty caused by impending elections as well as by sustained pressures on client budgets given the broader macro climate. The Group is extremely well positioned to capitalise on the uptake of client project work anticipated following the outcomes of elections and as macro pressures ease. Our newest division, Diversified Services, showed strong revenue growth of 97%, of which 32% was organic, albeit this does come from a low base and will moderate over time as the division grows.

A key focus of the Group remains on retained clients with greater than or equal to $100,000 annual spending. PPHC ended FY 2023 with 468 clients spending $100,000 or more and is on track to report growth in this KPI for FY 2024. This is supported by the internal referral awards and compensation programmes that are based on Group-wide performance. Other elements central to this growth strategy are (i) the start-up of Concordant which offers clients a single touchpoint to access a world-class strategic communications capability supported by a suite of PPHC services across all operating companies, and (ii) the leveraging of premium non-lobbying services - such as compliance services for Federal and state-level lobbying, policy and trade research, stakeholder research, and a wide range of grant writing and procurement-related expertise.

The Group now directly represents nearly half of the Fortune 100 and quarter of the Fortune 500, in addition to many more via their trade associations that the Group serves.

Investing to accelerate growth

In Q2 2024, PPHC successfully completed the acquisitions of LPA and Pagefield. These were the Group's third and fourth significant acquisitions since IPO, the first being Sacramento-based KP Associates, which completed in 2022, and the second being MultiState Associates, which completed in 2023. Pagefield is a leading strategic communications and cross-party public affairs advisory firm in the UK, which is measured as the sixth largest global economy and, along with the EU, is at the forefront of global policy issues. LPA is a leading public affairs agency in California, the largest state economy in the US and is measured as the fifth largest global economy.

The acquisition of LPA strengthens the Group's position in a key US state and increases our expertise in critical sectors including technology, green energy, and healthcare, and the acquisition of Pagefield delivers on the Group's ambition to enter into international political capitals. LPA has now been fully integrated and the integration of Pagefield is progressing in line with our expectations. Both companies are successfully utilising the newly expanded PPHC network and have registered new business wins via intra-group client referrals.

The government relations and strategic communications markets remain active around the world and the Group is seeking to capitalise on the current pipeline of opportunities as it aims to further broaden its geographic base into key political geographies while adding complementary specialisations. The pipeline of M&A opportunities remains strong in the US, UK and Mainland Europe.

Current Trading and Outlook

• The performance delivered in H1 2024 has set the Group up well for the remainder of the year and the Group is on track to meet full year market expectations, with the Underlying EBITDA margin for H2 2024 expected to be at or slightly above the H1 2024 level.
• The Board retains its confidence in the ongoing prospects for the Group and reiterates its medium-term guidance to achieve:

o organic revenue growth between 5% and 10%;

o incremental growth from future M&A; and

o an Underlying EBITDA margin between 25% and 30%.

Financial Review

In the first half of 2024, revenue grew 8% to $71.1m, demonstrating the stability of the Group's core business operations, the dedication of our management teams across our operating companies, the success of our acquisitions and the critical importance of our work to our clients.

Underlying EBITDA for the period of $17.4m, up 3% over H1 2023 ($16.9m), was achieved at a margin of 24.5% (H1 2023: 25.8%). As a result of the Group including all cash expenses in the underlying profit metrics, this Underlying EBITDA margin was impacted by an increase in M&A advisory expenses as well as the start-up investment into Concordant, totalling a $1.8m investment or 250bps of margin.

The Group's debt position at Period end of $33.8m, offset by cash of $5.5m, resulted in a Net Debt position of $28.3m (H1 2023: net debt $9.1m). The increase in debt related to the acquisitions of Lucas Public Affairs and Pagefield Communications in Q2 2024.

Underlying Profit & Loss Statement

Please refer to the section 'basis of preparation' for an explanation of the non-cash items excluded from Underlying Net Income.

Revenue

The Group's total revenue for H1 2024 increased by 8.0% to $71.1m (H1 2023: $65.7m). The organic growth rate was 1.2% and the remainder was driven by the acquisitions of Lucas Public Affairs and Pagefield Communications, as well as MultiState which completed in 2023.

Organic growth of 1.2% was the outcome of strong continued organic growth in Government Relations at 4% and Diversified Services at 32%, offset by a reduction in Public Affairs of 13%. The segments showing growth primarily contract through retainers and subscriptions, while the decline in Public Affairs stems from a reduction in project work, which is inherently more one-off in nature as described above.

In H1 2024, 71% of the Group's revenues stemmed from Government relations (H1 2023: 71%), 22% came from Public Affairs (H1 2023: 25%), and 7% from Diversified Services (H1 2023: 4%).

Profit

Underlying EBITDA of $17.4m was achieved at a margin of 24.5%, close to the Group's historic performance and ongoing guidance that margins will typically range between 25% and 30%. It should be noted that this half year's profit was impacted by $1.8m in incremental expenses with a one-off character, stemming from an increase in M&A advisory costs and also from start-up losses of Concordant. If adjusting for this, as has been done in the table below, the margin would have been 27.0%.

After interest and taxes, the Group's Underlying Net Income for H1 2024 amounted to $13.2m, up 4% from $12.7m in H1 2023.

Other

The Group's net finance costs for H1 2024 were $0.5m (H1 2023: $0.4m), illustrating the inclusion of additional debt on the Group's balance sheet at the time of the LPA and Pagefield acquisitions in Q2 2024.

The tax accrual for H1 2024 amounted to $3.7m (H1 2023: $3.8m), which represents a blended charge of 22% to Underlying Profit before Tax. This rate represents a slight improvement over the 23% effective rate in H1 2023 and is in line with the rate we recorded for FY 2023.

The Group ended 2023 with 333 employees and at 30 June 2024 this had increased to 367, primarily as a result of the acquisitions of LPA and Pagefield. The Group's average employee count during H1 was 330 (H1 2023: 294).

Cash flow

Adjustment to Presentation of Cash Flow

GAAP

During the Company's preparation of its consolidated financial statements for the six months ended 30 June 2024, management determined that certain cash flow items relating to payments made in respect of its acquisitions had been incorrectly classified within the consolidated statements of cash flows for the six months ended 30 June 2023 (unaudited) and the year ended 31 December 2023 (audited). As a result, the Company has adjusted the GAAP statement of cash flow for its consolidated financial statements for the same periods in this interim filing. The Group anticipates that this will also be formally restated in its next Annual Report. Management emphasizes that these changes did not impact the Company's total assets, liabilities, equity or net profit or Earnings Per Share as of 30 June 2023 or 31 December 2023 or during the period or year then ended.

The adjustments all relate to the fact that, as part of the acquisitions that have been completed since PPHC's IPO in 2021, and in order to protect the interests of the Group, the shares and cash payable as part of these transactions can be clawed back and forfeited on certain events of termination of employment. In the P&L, the addition of these provisions to purchase price paid creates a post-combination compensation charge in accordance with accounting guidance under US GAAP (Accounting Standards Codification, ASC 805-10-55-25). In examining the accounting guidance in ASC 230, Classification of Certain Cash Receipts and Cash Payments, from this interim filing onwards, the Group will classify the cash flow impact of the post-combination compensation charges as cash used for operational purposes and in certain cases as cash used for financing purposes, as appropriate.

In addition, with respect to contingent consideration paid not within three months of the acquisition date, after examining the accounting guidance of ASC 230, Classification of Certain Cash Receipts and Cash Payments, from this interim filing onwards the Group will classify these payments as cash flow from financing activities (for the portion up to the acquisition date fair value of the contingent consideration liability) and cash flow from operating activities (for the portion in excess of the acquisition date fair value of that liability).

Non-GAAP

Notwithstanding the abovementioned adjusted GAAP presentation, as part of this Management commentary the Group will also continue to provide a non-GAAP summary of Cash Flows. In this non-GAAP summary, all acquisition-related payments will be clustered and reported under 'Cash Flow from Investments'. In addition, the Group now also presents, as part of Management commentary, the often used measure 'Free Cash Flow'.

Cash Flow summary

The Group recorded strong (non-GAAP) Cash Flow from Operations of $6.0m (H1 2023: $1.9m). The generation of Cash Flow from Operations in the first half of the year tends to be muted as a result of the payment of annual bonuses across the Group in Q1 and seasonal working capital trends. Similar to prior years, management continues to expect the majority of Cash Flow from Operations to be generated in the second half of the year.

Balances end of period

The Group's debt position at the end of the Period was $33.8m, offset by cash of $5.5m, resulting in a Net Debt position of $28.3m (H1 2023: net debt $9.1m). The increase in debt relates to the acquisitions of Lucas Public Affairs and Pagefield Communications in Q2 2024.

Earnout obligations

As part of the typical structure applied for the acquisitions that were completed post-IPO, the Group also committed to making certain earnout payments. These earnout payments are based on a profit-driven formula and only materialise if the acquired company realises profit growth after the date of completion. Payments are typically made in a mix of cash and shares. In turn, each of these components of earnout payments may be subject to further vesting requirements and employment conditions, which keeps the recipients financially committed to the Group.

In relation to these earnout payments, the Group has liabilities recorded of $14.5m on its balance sheet, spread across the line items 'Contingent Consideration' and 'Other Liabilities'. This number is a reflection not only of the estimated foreseen nominal payments, but also of discount factors and fair value estimates.

In nominal terms, over the period 2025-2029, based on expected performance of each of the acquired companies, we anticipate having to make earnout payments of $43.6m, of which $24.5m payable in cash and the remainder in shares. The maximum earnout liability over that same period, which would only be reached if each acquisition meets very aggressive profit growth targets, would be $95.5m, of which $55.9m payable in cash and the remainder in shares. Generally, in order for an acquisition to reach maximum earnout payments, it would need to grow its profit by 25-30% annually over the earnout period.

Expected earnout liabilities - in nominal terms

Dividend

The Board of Directors of the Company has declared an Interim Dividend for 2024 of $0.047 per Common Share, which equates to an aggregate amount, based on the current number of outstanding Common Shares, of approximately $5.6m, 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, 27 September 2024. The ex-dividend date is 26 September 2024. The dividend will be paid no later than 25 October 2024.

This interim payment is in line with the Company's intention to pay approximately one third of the expected total dividend for the year as an Interim Dividend. Going forward, the Group will continue to weigh the dividend payout against the need to preserve cash for M&A purposes and debt repayment.

Information per share

For the purpose of giving investors a useful view on Earnings Per Share, the Group computed EPS not only on a GAAP Reported Profit basis, but also on an Underlying Profit basis. As explained in the section below, for the latter calculation the Group includes in the denominator those shares that have been issued in relation to post-IPO acquisitions. While those shares are still subject to vesting rules, and therefore not part of the Common Outstanding share count per GAAP definition, they entitle the recipients to dividends and voting rights.

Note that the growth in weighted of average number of shares in H1 2024 (5% basic, 6% fully diluted) was not only driven by customary drivers such as LTIP issuance and M&A related issuances, but also by the one-off issue of 2.1m shares in the fourth quarter of 2023 in relation to the Alpine remediation plan.

Basis of preparation

(1) Share-based accounting charge: As already mentioned in the previous reports, shares issued to employee shareholders at the time of the IPO are subject to a vesting schedule; Also, their employment agreements contain certain provisions which enable cash derived from the sale of shares at the time of the IPO to be clawed back and forfeited on certain events of termination of employment. These items create a share-based accounting noncash 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 ($197m) and taking into account the 14.6% of pre-admission employee shares sold in 2021, the H1 2024 non-cash charge is $15.2m (H1 2023: $15.4m). This share-based accounting non-cash charge has no impact on either tax or Company operations.

• Post-combination compensation charge: In the acquisitions that have been completed since the IPO in 2021, the Group makes payments in cash and shares. In order to protect the interests of the Group, the shares issued as part of these transactions were made subject to vesting schedules. To a certain degree, the cash paid as part of these transactions can be clawed back and forfeited on certain events of termination of employment.

The addition of these provisions to purchase price paid creates a post-combination compensation charge in accordance with accounting guidance under US GAAP (Accounting Standards Codification, ASC 805-10-55-25). The H1 2024 charge was $4.7m (H1 2023: $3.0m). Again, this is a non-cash charge and has no impact on either tax or Company operations.

(3) LTIP charges. In 2022 the Group issued the first stock-based compensation units under the Omnibus Plan. This plan was introduced at the time of the IPO and allows the Group to issue up to a certain number of stock-related units (e.g. options, restricted stock). In H1 2024, PPHC issued 0.3 million (H1 2023: 0.6 million) stock options at a premium exercise price (market price at time of grant plus 20%), exercisable at the 3rd anniversary of the grant. Also, the Group issued 2.9 million restricted stock units (H1 2023: 1.5m), 0.7 million restricted stock awards (H1 2023: 0.8m). No restricted stock appreciation awards were awarded (H1 2023: 1.9 million) as they are getting phased out. The charges relating to these issuances, $1.4m in H1 2024 (H1 2023: $0.7m), as reflected in our P&L were computed using the Black Scholes method.

• Amortization of intangibles: The non-cash amortization charge of $2.1m (H1 2023: $1.9m) relates to the amortization of customer relationships, developed technology, and noncompete agreements per ASC 805.
• Bargain purchase: As laid out in point 2, because a significant part of the purchase price of our acquisitions is tied to continued employment, this part has been accounted for as post-combination compensation in the Group's P&L. As a consequence, for certain acquisitions, the remaining book purchase price is lower than the tax purchase price. The reason for the bargain purchase gain is tied directly to the tax purchase price significantly exceeding the book purchase price and is not a reflection of a true bargain purchase of the actual intangible and tangible assets of these acquisitions. The income recorded relating to the bargain purchase was $2.4m in H1 2024 (H1 2023: $4.8m).
• Change in Contingent Consideration: The contingent consideration liability recorded as part of the acquisitions is adjusted at each reporting period for the change in the estimated fair value of that liability. The fair value changes over time based on management assumptions, the passage of time, payments made, and other external inputs, such as discount rates and volatility. The change in the estimated fair value of the contingent consideration is recorded as a non-operating expense of $2.3m in H1 2024. There was no change in the fair value of the contingent consideration in H1 2023.

For the calculation of Earnings per Share (EPS) based on GAAP Profit, as a denominator, the Group uses the weighted average number of Common Outstanding shares during the period. For the calculation of Earnings per Share (EPS) based on Underlying Profit, as a denominator, the Group uses the weighted average number of Legally Issued shares during the period. This comprises all the Common Outstanding shares, as well as those shares that were yet unvested but entitled the owner to dividends and voting rights (e.g. shares issued in relation to one of our post-IPO acquisitions). Consequently, the weighted average number of legally issued shares in H1 2024 was 116,439,545 (H1 2023: 111,323,766) and on a fully diluted basis (taking into account any issued stock instrument, regardless of exercise price), this number was 121,766,698 (H1 2023: 114,728,537).

Consolidated Balance Sheets

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 consulting services in the areas of Governmental Relations, Public Affairs and other ancillary areas, primarily in the United States of America ("U.S."). With the acquisition of Pagefield Communications Limited ("Pagefield"), the Company has expanded its capabilities to the United Kingdom and parts of Europe.

These unaudited interim consolidated financial statements for the six months ended June 30, 2024 have been prepared in accordance with the accounting policies set out in the Annual Report and Financial statements of the Company for the year ended December 31, 2023 using the recognition and measurement principles 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 United States Dollars ("USD"). All intercompany transactions and balances have been eliminated in consolidation.

The functional currency of Pagefield is the British pound sterling ("GBP"). The assets and liabilities of Pagefield are translated to USD at period end exchange rates, while statements of operations accounts are translated at the average exchange rate during the period. Stockholders' equity accounts are translated at their historical exchange rate. The effects of foreign currency translation adjustments are included in other comprehensive loss, which is a component of other comprehensive loss in stockholders' equity.

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 holding company:

PPHC International Ltd

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

KP Public Affairs, LLC

MultiState Associates, Inc.

Concordant LLC

Lucas Public Affairs, LLC

Pagefield Communications Limited

Initial Public Offering:

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. The Holdings Distribution Discount of approximately $4,463,000 was paid in full during 2022.

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 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 Government Relations, Public Affairs and Diversified Services. 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.

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.

See the Segment Reporting Note 11 for a description of the principal activities, by reportable segment, from which the Company generates revenue.

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. Deferred revenue of approximately $2,197,000 and $2,861,000 from December 31, 2023 and 2022 is expected to be recognized as revenue in 2024 and 2023, respectively.

Cash and Cash Equivalents:

Accounts Receivable:

The Company provides for an allowance for credit losses 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. As of June 30, 2024, June 30, 2023 and December 31, 2023 the balance of allowance for credit losses approximated $875,000, $427,000 and $794,000.

Leases:

As of June 30, 2024, June 30, 2023 and December 31, 2023 the Company had approximately $20,484,000, $23,325,000, and $21,434,000, respectively, of operating lease ROU assets and $23,942,000, $26,278,000 and $24,847,000, 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. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as common area maintenance expenses and increases in lease payments based on changes in index rates, are not included in the ROU assets or liabilities. These variable lease payments are expensed as incurred.

As of June 30, 2024, 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 June 30, 2024:

Property and equipment:

Business Combination

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 June 30, 2024, the Company's reporting units consisted of Government Relations Consulting, Public Affairs Consulting and Diversified Services. 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 annual evaluation for the year ended December 31, 2023 and determined the fair value of each reporting unit is greater than the carrying amount. Management has determined that no triggering event or other change in circumstances have occurred during the six months ended June 30, 2024 and 2023. Accordingly, the Company has not recorded any impairment charges related to goodwill for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023.

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 annual evaluation for the year ended December 31, 2023 and determined the fair value of the trademarks is greater than the carrying amount. Management has determined that no triggering event or other change in circumstances have occurred during the six months ended June 30, 2024 and 2023. Accordingly, the Company has not recorded any impairment charges related to trademarks for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023.

Other intangible assets:

The Company's definite-lived intangible assets consists of customer relationships, developed technology and noncompete agreements that have been acquired through various acquisitions. The Company amortizes 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 six months ended June 30, 2024 and 2023 and the year ended December 31, 2023.

Deferred revenue:

Deferred revenue represents prepayment by the customers for services that have yet to be performed. As of June 30, 2024, June 30, 2023 and December 31, 2023, deferred revenue was approximately $5,629,000, $3,118,000, and $2,197,000, respectively. Deferred revenue is expected to be recognized as revenue within a year.

Accounts payable and accrued expenses:

Accounts payable and accrued expenses consist of the following as of:

Marketing and advertising costs:

The Company expenses marketing and advertising costs as incurred. Marketing and advertising expense for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023 was approximately $206,000, $81,000 and $216,000 respectively.

Income taxes:

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.

Estimates:

Share-based accounting charge and stock option expense:

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 three reportable segments. These segments consist of Government Relations Consulting, Public Affairs Consulting and Diversified Services.

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. Due to their anti-dilutive effect, the calculation of diluted net loss per share for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023 does not include the common stock equivalent shares below:

The following table includes the weighted average shares outstanding for each respective period:

Fair value of financial instruments:

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Assets and liabilities measured at fair value are classified in their entirety based on the level of input that is significant to the fair value measurement. The Company's assessment of the significant of a particular input to the entire fair value measurement requires management to make judgments and consider the factors specific to the asset or liability.

The carrying values of cash, accounts receivable, and accounts payable and accrued expenses at June 30, 2024 and 2023 and the year ended December 31, 2023 approximated their fair value due to the short maturity of these instruments.

The Company's financial instruments that are measured on a recurring basis consist of contingent consideration from the acquisition of KP Public Affairs LLC, Multistate Inc., Lucas Public Affairs, Inc., and Pagefield. The fair value of the contingent consideration was measured using Level 3 inputs.

The change in fair value of the contingent consideration of approximately $2,264,000 for the six months ended June 30, 2024 and $1,711,000 for the year ended December 31, 2023, consisted of changes in the fair value of the contingent consideration for MultiState Inc and KP LLC. The change in fair value was primarily due to the effect of the change in the forecasted growth rate of each entity.

The Company performed Monte Carlo simulations to estimate the achievement and amount of certain future operating results. The Monte Carlo simulations utilize estimates including; expected volatility of future operating results, discount rates applicable to future results, and expected growth rates. The tables below document the Monte Carlo assumptions and inputs (which are Level 3 inputs) each balance sheet date:

As of June 30, 2024

Assumptions related to future operating performance are based on management's annual and ongoing budgeting, forecasting and planning processes and represent management's best estimate of the future results of the Company's operations at a point in time. These estimates are subject to many assumptions, such as the economic environments in which the Company operates, demand for services and competitor actions. Estimated calculations of the future annual profit after tax amounts are discounted to present value using a market participant, weighted average cost of capital, which considers the risk inherent in the probability adjusted future annual profit after tax amounts from services provided. The financial and credit market volatility directly impacts certain inputs and assumptions used to develop the weighted average cost of capital such as the risk-free interest rate, industry beta, debt interest rate, and our market capital structure. These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. The use of different inputs and assumptions could increase or decrease our estimated fair value calculations of the contingent consideration.

Contingent Consideration:

The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration and recognizes any change in fair value in the consolidated statements of operations. The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and, therefore, materially affect the Company's future financial results. The contingent consideration liability is to be settled through a combination of cash and shares of common stock based on each respective purchase agreement and the amount ultimately paid is dependent on the achievement of certain future operating results.

Other Liability:

Other liability consists of certain future payments that the Company could be required to make if various operating targets are achieved from the acquisitions of KP LLC, MultiState Inc, LPA, and Pagefield (See Note 3). The Company records post-combination business expense over the vesting or claw-back period applicable for these future payments on a straight-line basis with the amount accrued recorded as Other liability. The future earn-out payments that have vesting or claw-back rights tied to employment will reduce the amount of the Other liability when paid.

Adoption of New Accounting Pronouncement:

During 2023, the Company adopted Accounting Standards Update No. 2016-13 ("ASU 2016-13"), Financial Instruments-Credit Losses. ASU 2016-13 requires organizations to measure all expected credit losses for instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance is applicable for the Company's accounts receivable. However, the adoption of ASU 2016-13 did not have a material impact to the Company's valuation of its accounts receivable.

Reclassification:

Categorization of the June 30, 2023 goodwill segment disclosures have been reclassified to conform to the June 30, 2024 and December 31, 2023 presentation. These reclassifications had no impact on the total results or net assets of the Company.

Subsequent events:

Management has evaluated the subsequent events for disclosure in these consolidated financial statements through September 17, 2024, the date these consolidated financial statements were available for issuance, and determined that no events have occurred that would require adjustment to or disclosure in these consolidated financial statements.

NOTE 2 ADJUSTMENT TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS

During the Company's preparation of its consolidated financial statements for the six months ended June 30, 2024, management determined that certain cash flow items had been incorrectly classified within the consolidated statements of cash flows for the six months ended June 30, 2023 and the year ended December 31, 2023. These errors did not impact the Company's total assets, liabilities, equity or net loss as of June 30, 2023 or December 31, 2023 or during the period or year then ended.

During 2023, the Company made a cash payment of $17,600,000 for the acquisition of MultiState Associates, Inc. (see Note 3). The Company classified this payment as a cash flow from investing activities in its consolidated financial statements for the six months ended June 30, 2023 and the year ended December 31, 2023. However, $9,504,000 of this payment was recorded as prepaid post-combination expense due to the vesting and claw-back provisions tied to continuing employment for this payment amount. In examining the accounting guidance in ASC 230, Classification of Certain Cash Receipts and Cash Payments, management determined that the $9,504,000 payment should have been classified as a cash flow from operating activities. As a result, the Company has adjusted the cash flow presentation for its consolidated financial statements for the six months ended June 30, 2023 and the year ended December 31, 2023 in this interim filing for this item.

During 2023, the Company made a cash payment of $3,643,200 for an earn-out payment related to the acquisition of KP Public Affairs LLC (see Note 3). The Company classified this payment as a cash flow from investing activities in its consolidated financial statements for the six months ended June 30, 2023 and the year ended December 31, 2023. However, $1,821,600 of this payment was for amounts owed that are tied to vesting or claw-back provisions requiring continued employment. The liability recorded for this amount is an operating liability that is recorded as Other Liability on the Company's consolidated balance sheet. Therefore, the cash settlement payment for this liability requires classification as a cash flow from operating activities.

In addition, the other $1,821,600 of this payment was settlement of the contingent consideration liability recorded in the Company's consolidated balance sheet. However, this payment was not made within three months of the acquisition date of KP Public Affairs LLC. As such, in accordance with the accounting guidance of ASC 230, Classification of Certain Cash Receipts and Cash Payments, the portion of the cash payment up to the acquisition date fair value of the contingent consideration liability of $1,779,000 should be classified as a cash flow from financing activities and the amounts paid in excess of the acquisition date fair value of that liability of $42,600 should be classified as a cash flow from operating activities. As a result, the Company has adjusted the cash flow presentation for its consolidated financial statements for the six months ended June 30, 2023 and the year ended December 31, 2023 in this interim filing for these items.

The total impact to the Company's consolidated financial statements for the six months ended June 30, 2023 and the year ended December 31, 2023 is as follows:

NOTE 3 ACQUISITIONS

KP Public Affairs LLC

On October 1, 2022, the Company entered into an Asset Purchase Agreement ("KP Agreement") and acquired certain assets and assumed certain liabilities of KP Public Affairs LLC ("Seller" or "KP LLC") through the creation of a wholly-owned subsidiary, KP Public Affairs, LLC ("KP"). At the closing of the transaction, the Company paid the Seller cash in the amount of $10,306,800 ("Closing Cash Payment") and issued 739,589 shares of the Company's common stock ("Closing Share Payment") to Seller at an aggregate fair value of $1,145,200.

During the year ended December 31, 2023, the Company paid the Seller an additional amount of consideration totaling $4,048,000 ("KP Closing True-Up Payment") based on the specific operating results of KP through December 31, 2022. The payment of the KP Closing True-Up Payment was pro-rated as $3,643,200 in cash ("KP True-Up Cash Payment") and 245,389 shares of common stock ("KP True-Up Share Payment") at an aggregate fair value of $404,800. Approximately $1,822,000 of the cash paid was applied against the contingent liability, $1,822,000 of the cash was applied against the other liability and the remaining $404,800 worth of common stock issued will be recorded as post-combination expense and equity over the required vesting terms for the shares issued.There are additional contingent payments that the Seller can earn in the future depending on certain operating results that are achieved. The total amount of consideration that the Company could be required to pay to the Seller in the amount of cash and stock ("Seller Shares") is $35,000,000. The equity component of the contingent payments ranges between 20% and 35%.

Reasons for the Acquisition

Accounting for the Acquisition

Purchase Consideration

Engage LLC

On November 1, 2022, the Company (through its wholly-owned subsidiary, Forbes Tate Partners, LLC) entered into an Asset Purchase Agreement ("Engage Agreement") and acquired certain assets and assumed certain liabilities of Engage LLC ("Engage"). At the closing of the transaction, the Company paid Engage cash in the amount of $1,925,000 ("Engage Cash Payment") and issued 487,301 shares of the Company's common stock ("Engage Restricted Shares") at an aggregate fair value of $825,000.

Reasons for the Acquisition

Accounting for the Acquisition

Purchase Consideration

The Company determined that certain consideration provided to Engage in the Engage Agreement does not qualify as purchase consideration in accordance with the guidance of ASC 805. The Company determined that the purchase consideration consists of the amount of Engage Cash Payment paid to the Junior Principals and the Engage Cash Payment to the Senior Principals that is not subject to vesting or claw back linked to continuing employment, which totaled $894,000. The value of the Engage Restricted Shares of $825,000 and the remaining Engage Cash Payment amount of $1,031,000 ("Prepaid Post-Combination Compensation") will be recognized as a charge to expense in accordance with ASC 805-10-55-25 (See Note 7).

Purchase Price Allocation

In 2023, during the measurement period, the Company determined that an adjustment to increase the Company's deferred tax asset of $281,000 was necessary and a corresponding gain on bargain purchase was recorded.

The identified definite-lived intangible assets were as follows:

MultiState Associates, Inc.

On March 1, 2023, the Company entered into an Asset Purchase Agreement ("MultiState Agreement") and acquired certain assets and assumed certain liabilities of MultiState Associates, Inc. ("MS Seller" or "MultiState Inc") through the creation of a wholly-owned subsidiary, MultiState Associates, LLC ("MS LLC"). At the closing of the transaction, the Company paid the Seller cash in the amount of $17,600,000 ("MS Closing Cash Payment") and issued 2,740,717 shares of the Company's common stock ("MS Closing Share Payment") to Seller at an aggregate fair value of $4,400,000, of which, 1,973,316 shares have vesting requirements ("MS Closing Vesting Shares").

In addition, there are additional contingent payments that the MS Seller can earn in the future depending on certain operating results that are achieved. The total amount of consideration that the Company could be required to pay to the MS Seller in the amount of cash and stock ("MS Seller Shares") is $70,000,000. The equity component of the contingent payments is 50%. During the six months ended June 30, 2024, the Company paid the MS Seller $2,000,000 of cash ("MS First Interim Cash Payment") and $2,000,000 of common stock ("MS First Interim Share Payment"). Approximately $1,709,000 of the cash and stock paid was applied against the contingent liability, $982,000 of the cash was applied against the other liability and prepaid post-combination expense and the remaining $1,309,000 worth of common stock issued ("MS First Interim Vesting Shares") will be recorded as post-combination expense and equity over the required vesting terms for the shares issued.

Reasons for the Acquisition

The Company acquired MultiState Inc to expand the scope of its consulting services provided in respect of federal, state and local governments. Specifically, MultiState Inc provides lobbying compliance, legislative activity tracking, lobbying brokerage and other consulting services to Fortune 500 companies, non-profit organizations, elected officials and leading advocacy and trade associations throughout the United States.

Accounting for the Acquisition

Purchase Consideration

Purchase Price Allocation

The provisional allocation of the purchase consideration resulted in the following amounts being allocated to the assets acquired and liabilities assumed as of the purchase date of March 1, 2023 based on their respective estimated fair values is summarized below:

Lucas Public Affairs, Inc. ("LPA")

On May 1, 2024, the Company entered into an Asset Purchase Agreement ("LPA Agreement") and acquired certain assets and assumed certain liabilities of Lucas Public Affairs, Inc. ("Seller" or "LPA") through the creation of a wholly-owned subsidiary, Lucas Public Affairs, LLC ("LPA LLC"). At the closing of the transaction, the Company paid the Seller cash in the amount of $6,000,000 ("LPA Closing Cash Payment") and issued 958,371 shares of the Company's common stock ("LPA Closing Share Payment") to Seller at an aggregate fair value of approximately $1,500,000, of which, all the shares have vesting requirements ("LPA Vesting Shares").

In addition, there are additional contingent payments that the Seller can earn in the future depending on certain operating results that are achieved. The total additional amount of consideration that the Company could be required to pay to the Seller is $9,800,000 of cash and $4,700,000 of stock ("LPA Seller Shares") for total additional consideration of up to $14,500,000. This combined with the closing payments already made could require total payments of up to $22,000,000 to the Seller.

The LPA Agreement provides certain forfeiture provisions applicable to any future cash or share payments owed, which generally require the owners of the Seller ("LPA Owner") to remain employed by the Company for a certain period of time to receive the full amount of those future payments. There are certain exceptions to the forfeiture provisions if termination of employment occurs under certain permitted events ("LPA Acceleration Event") as defined in the LPA Agreement.

In addition, under certain circumstances outlined in the LPA Agreement, the Company can claw back a portion of certain payments previously paid if a LPA Owner is not employed by the Company as of certain future dates.

If a LPA Owner's employment is terminated as a result of a LPA Acceleration Event, a percentage of the unvested LPA Owner Shares (representing such LPA Owner's ownership percentage in Seller) shall become fully vested. The LPA Seller Shares issued have some restrictions but they also have certain legal rights consistent with the Company's other shares of Common Stock outstanding, including certain voting rights and the rights to dividends paid by the Company. In addition, the LPA Agreement contains certain provisions requiring the forfeiture of a percentage of all cash and shares received by LPA Owner if certain restrictive covenants are breached by a LPA Owner.

Reasons for the Acquisition

The Company acquired LPA to expand the scope of its consulting services provided in respect of federal, state and local governments. Specifically, LPA provides significant complementary services to companies and organizations doing business in the state of California.

Accounting for the Acquisition

The acquisition of LPA was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC 805, Business Combinations ("ASC 805"). The acquired assets, including identifiable intangible assets and liabilities assumed, have been recorded at their estimated fair values.

Preliminary Purchase Consideration

The Company determined that certain consideration provided to LPA in the LPA Agreement does not qualify as purchase consideration in accordance with the guidance of ASC 805. The Company determined that the preliminary purchase consideration consists of the amount of cash and share payments owed to LPA that are not subject to a vesting or claw back provision that is directly linked to the continued employment of LPA Owners. The total preliminary purchase consideration consisted of the following amounts:

The LPA Closing Cash Payment and contingent consideration allocated as preliminary purchase consideration consists of the amount of the LPA Closing Cash Payment and estimated fair value of future payments that are not subject to vesting or claw back provisions tied to continued employment.

Preliminary Purchase Price Allocation

The provisional allocation of the preliminary purchase consideration resulted in the following amounts being allocated to the assets acquired and liabilities assumed as of the purchase date of May 1, 2024 based on their respective estimated fair values is summarized below:

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 fair value of noncompete agreements was determined using an income approach method, which requires management to estimate a number of factors related to the expected future cash flows of LPA LLC and the potential impact and probability of competition, assuming such noncompete agreements were not in place. The primary factors that contributed to the gain on bargain purchase recognized from the LPA acquisition include the requirement for the key employees of LPA to stay employees of the Company for a significant period of time.

Pagefield Communications Limited ("Pagefield")

On June 7, 2024, the Company entered into an Asset Purchase Agreement ("Pagefield Agreement") and acquired the stock of Pagefield Communications Limited ("Seller" or "Pagefield") through the creation of a wholly-owned subsidiary, PPHC International Ltd. ("PPHC LTD"). At the closing of the transaction, the Company paid the Seller cash in the amount of 14,992,868 GBP, which was approximately $19,420,000 USD ("Pagefield Closing Cash Payment") and issued 897,640 shares of the Company's common stock ("Pagefield Closing Share Payment") to Seller at an aggregate fair value of approximately $1,441,000.

In addition, there are additional contingent payments that the Seller can earn in the future depending on certain operating results that are achieved. The total additional amount of consideration that the Company could be required to pay to the Seller is up to 13,800,000 GBP, which includes up to 8,800,000 GBP subject to future vesting and clawback provisions. The additional contingent consideration combined with the closing payments already made could require total payments of up to 30,000,000 GBP to the Seller.

The Pagefield Agreement provides certain vesting and forfeiture provisions applicable to a portion of the future cash or share payments owed. These provisions are specifically designated toward the continued employment of one of the owners of the Seller ("Restricted Owner"). The Restricted Owner is required to remain employed by the Company for a certain period of time to receive the full amount of those future payments. There are certain exceptions to the forfeiture provisions if termination of employment occurs under certain permitted events ("Pagefield Acceleration Event") as defined in the Pagefield Agreement.

If the Restricted Owner's employment is terminated as a result of a Pagefield Acceleration Event, a percentage of the unvested Restricted Owner Shares shall become fully vested. The LPA Seller Shares issued have some restrictions but they also have certain legal rights consistent with the Company's other shares of Common Stock outstanding, including certain voting rights and the rights to dividends paid by the Company. In addition, the LPA Agreement contains certain provisions requiring the forfeiture of a percentage of all cash and shares received by Seller if certain restrictive covenants are breached by an owner of Seller.

Reasons for the Acquisition

The Company acquired Pagefield to expand the geographic scope of its consulting services. Specifically, Pagefield provides services to companies and organizations doing business in the United Kingdom ("UK") while interacting with the UK government.

Accounting for the Acquisition

The acquisition of Pagefield was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC 805, Business Combinations ("ASC 805"). The acquired assets, including identifiable intangible assets and liabilities assumed, have been recorded at their estimated fair values.

Preliminary Purchase Consideration

The Company determined that certain consideration provided to Pagefield in the Pagefield Agreement does not qualify as purchase consideration in accordance with the guidance of ASC 805. The Company determined that the preliminary purchase consideration consists of the amount of cash and share payments owed to Pagefield that are not subject to a vesting or claw back provision that is directly linked to the continued employment of the sellers. The total preliminary purchase consideration consisted of the following amounts:

The contingent consideration allocated as preliminary purchase consideration consists of the amount of the estimated fair value of the projected future payments that are not subject to vesting or claw back provisions tied to continued employment.

Purchase Price Allocation

The provisional allocation of the preliminary purchase consideration resulted in the following amounts being allocated to the assets acquired and liabilities assumed as of the purchase date of June 7, 2024 based on their respective estimated fair values is summarized below:

*Based on the exchange rate in effect at the acquisition date

The identified definite-lived intangible assets were as follows:

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 fair value of noncompete agreements was determined using an income approach method, which requires management to estimate a number of factors related to the expected future cash flows of Pagefield and the potential impact and probability of competition, assuming such noncompete agreements were not in place.

Acquisition Payments

The cash payments made for the acquisitions at their respective closing date and subsequent earn-out payments made are as follows:

These cash payments are included in the statements of cash flows as follows:

The stock payments made for the acquisitions at their closing date and subsequent earn-out payments made consisted of the following:

NOTE 4: RELATED PARTY TRANSACTIONS

As of June 30, 2023 and December 31, 2023, the amounts due from related parties of approximately $1,039,000 and $1,054,000 include the amount expected to be paid to the Company related to working capital loan and adjustments associated with the MultiState acquisition. During the six months ended June 30, 2024, the working capital loan and adjustments were settled. As of June 30, 2024, the amounts owed to related parties of approximately $781,000 consists primarily of a working capital loan of $750,000 from the sellers of LPA to the Company, which must be repaid prior to September 30, 2024.

During December 2021, the Company entered into a term note agreement ("2021 Note") with The Alpine Group, Inc. ("Alpine Inc"). The 2021 Note provided Alpine Inc with the ability to request a one-time borrowing of up to $750,000 from the Company at any time prior to December 31, 2022. The purpose of the 2021 Note was to provide Alpine Inc with funds to cover certain federal and state income taxes to be owed by Alpine Inc in connection with the sale of shares of the Company's common stock in the IPO. During April 2022, the Company advanced $513,000 to Alpine Inc in accordance with the terms of the 2021 Note. The interest rate on the 2021 Note is equal to the Prime Rate as published in the Wall Street Journal. The 2021 Note requires an annual payment of accrued and unpaid interest on the last business day of December each year and through the maturity date of January 16, 2025. The 2021 Note balance as of June 30, 2024, June 30, 2023, and December 31, 2023 was $513,000. The 2021 Note was classified as a current asset as of June 30, 2024, and a non-current asset as of June 30, 2023 and December 31, 2023. The amount of accrued interest and interest revenue from the 2021 Note is not material.

During November 2023, the Company entered into term note agreements ("2023 Notes") with certain employees of the Alpine Group Partners, LLC totaling $1,750,000. The interest rate on the 2023 Notes is 7.5% and the notes are payable in annual installments of $350,000 plus all accrued and unpaid interest beginning on November 1, 2024 with a maturity date of November 1, 2028 or the effective date of the termination of employment of the respective employee borrower for any reason, if earlier than the maturity date. As of June 30, 2024 and December 31, 2023, the 2023 Notes were recorded in notes receivable - related parties with $350,000 classified as a current asset and $1,400,000 classified as a non-current asset. The amount of accrued interest and interest revenue from the 2023 Notes is not material.

NOTE 5: GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill is an indefinite lived asset with balances as follows as of:

As of June 30, 2024, June 30, 2023 and December 31, 2023, there have been no impairments to goodwill. During 2024, goodwill increased by approximately $17,750,000 as a result of the acquisition of Pagefield. See Note 3.

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

Intangible Assets

The Company's intangible assets consist of customer relationship assets, developed technology and noncompete agreements acquired through various acquisitions, which are definite lived assets and are amortized over their estimated useful lives. The estimated useful lives for the customer relationship and developed technology assets range from 7 to 9 years and the estimated useful lives for the noncompete agreements range from 3 to 5 years. In addition, intangible assets consist of tradenames, which are indefinite lived assets and evaluated for impairment on an annual basis or more frequently as needed. The cost of the Company's tradenames, customer relationships, developed technology and noncompete agreements, and the accumulated amortization of the Company's customer relationships, developed technology and noncompete agreements is as follows as of:

Amortization expense for customer relationship and noncompete agreement assets approximated $2,075,000, $1,924,000 and $3,878,000 for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023, respectively.

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

Amortization

NOTE 6 LINE OF CREDIT AND NOTES PAYABLE

Bank credit facility

On February 28, 2023, the Company entered into a $17,000,000 credit agreement with a bank ("Credit Agreement"). The Credit Agreement has two components, Facility 1 is a Senior Secured Line of Credit in the amount of up to $3,000,000 and Facility 2 is a Senior Secured Term Loan in the amount of $14,000,000.

During April 2024 and June 2024, the Company entered into the First Amendment to Credit Agreement and Second Amendment to Credit Agreement (collectively the "Amended Credit Agreements"). The Amended Credit Agreements provided the Company with an additional term loan of $6,000,000 on April 30, 2024 ("2024 Term Loan A") and an additional term loan of $19,000,000 on June 7, 2024 ("2024 Term Loan B").

In accordance with the Amended Credit Agreements, the definition of the interest rate applicable to the Facility 1 and Facility 2 changed from being calculated based on the Bloomberg Short-Term Bank Yield Index plus 225 basis points to the Secured Overnight Financing Rate ("SOFR") as administered by the Federal Reserve Bank of New York plus 2.25% per annum. The interest rate for the 2024 Term Loan A and 2024 Term Loan B (collectively the "2024 Term Loans") is the SOFR plus 2.60% per annum.

The loans under the Credit Agreement and Amended Credit Agreements are collateralized by substantially all of the net assets of the Company. Facility 2 matures on January 31, 2026. The Company has drawn $14,000,000 from Facility 2 and utilized those funds as part of the consideration to acquire MultiState Inc. During 2023, the Company utilized $1,000,000 from Facility 1 for the MultiState Inc. acquisition. The Company paid approximately $451,000 in debt issuance costs for the Credit Agreement and has recorded this amount as a debt discount and is amortizing the debt discount to interest expense over the term of the Credit Agreement using the straight-line method, which approximates the effective interest method. The Company borrowed $6,000,000 for the 2024 Term Loan A and $19,000,000 for the 2024 Term Loan B during April 2024 and June 2024, respectively. The Company paid approximately $786,000 in debt issuance costs for the 2024 Term Loans and has recorded this amount as a debt discount and is amortizing the debt discount to interest expense over the term of the 2024 Term Loans using the straight-line method, which approximates the effective interest method.

The Company is required to make monthly payments of principal of $291,667 plus interest beginning in March 2023 through the maturity date of January 31, 2026 for Facility 2. The principal payment for Facility 1 is due on the maturity date for that facility, which is January 31, 2026. Periodic interest-only payments are due on Facility 1 through the maturity date. The Company is required to make interest-only payments on the 2024 Term Loans starting on May 1, 2024 through October 31, 2024. Beginning on November 1, 2024, the Company is required to make forty-two equal monthly installments of principal each in the amount of 1.25% of the unpaid principal balance of the 2024 Term Loans as of October 31, 2024, plus interest on the 2024 Term Loans, until the maturity date of the 2024 Term Loans of April 30, 2028. In addition, a final payment of all outstanding principal and interest will be due on April 30, 2028.

The total approximate interest expense incurred for these loans was as follows:

As of June 30, 2024 and December 31, 2023, the Facility 1 had been repaid in full. The Company is able to re-borrow up to $3,000,000 under Facility 1 or 80% of the Company's eligible receivables, whichever is less.

The Company's Facility 2, 2024 Term Loan A, and 2024 Term Loan B consist of the following as of:

As of June 30, 2024, the future principal maturities of these loans are as follows:

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 June 30, 2024, June 30, 2023, and December 31, 2023 was approximately $169,000, $198,000 and $184,000, respectively. Interest expense on the note payable - landlord for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023 was approximately $7,000, $8,000 and $16,000, respectively. As of June 30, 2024, the amount included in Notes payable, current portion, net was approximately $21,000.

As of June 30, 2024, the future maturities of this note payable is as follows:

NOTE 7 STOCKHOLDERS' EQUITY AND SHARE-BASED ACCOUNTING CHARGE

As of June 30, 2024, 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 of June 30, 2024, June 30, 2023 and December 31, 2023, the number of the Company's shares of common stock outstanding for legal purposes was greater than the number of shares of common stock outstanding for accounting purposes. Therefore, the difference between the legally outstanding shares of common stock on the face of the balance sheet and the amount outstanding on the statement of equity consists of shares issued with restrictions (collectively "Restricted Shares") as follows:

The weighted-average common shares outstanding, basic and diluted reported on the consolidated statement of operations is 110,740,866, 108,483,598 and 108,606,133, which is different from the 112,502,888, 108,722,213 and 109,542,220 ending shares as of June 30, 2024, June 30, 2023 and December 31, 2023 on the statement of equity due to the first numbers representing an average during the year compared to the amount outstanding at the end of the year.

Other Restricted Shares consists of the following as of:

ASC 718-10-S99-2 Charge

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 approximately $15,194,000, $15,431,000 and $30,904,000 for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023, respectively.

As of June 30, 2024, there were 82,628,340 Retained Pre-IPO Shares, held by current employees and subject to vesting requirements, and 36,829,997 of these shares were fully vested. These shares were issued in 2021 and the weighted-average grant date fair value of these shares was $1.82 as of the grant date. As of June 30, 2024, the unrecognized compensation cost from these restricted shares was approximately $74,600,000, which is expected to be recognized over a weighted-average period of 2.5 years.

ASC 805-10-55-25 Charge

The Company has acquired various companies from 2022 to 2024 for a combination of cash, shares of Company Common Stock and future contingent payments ("Acquisition Payments"). As described in Note 3, a portion of the Acquisition Payments are subject to vesting and/or claw back provisions that are directly linked to the continuing employment of the certain owners of the acquired companies ("Post-Combination Payments"). As a result, in accordance with the guidance of ASC 805-10-55-25, Business Combinations, the Post-Combination Payments are not considered part of the purchase consideration for these acquisitions and the fair value of the Post-Combination Payments is being recognized as a charge for post-combination compensation over the period of the applicable vesting requirement or the period over which the claw back rights linked to employment lapse.

For the six months June 30, 2024 and 2023 and the year ended December 31, 2023, the post-combination compensation charge recorded by the Company was approximately $4,698,000, $3,016,000 and $6,295,000, respectively. This amount consists of the following components:

As of June 30, 2024, the unrecognized post-combination compensation charge was approximately $27,346,000, which is expected to be recognized over a weighted-average period of 2.2 years. The actual amount of Post-Combination Payments is subject to significant estimates and could change materially in the future.

The Company's potential future payments from its acquisitions exceed the liabilities recorded on the Company's balance sheet primarily due to the fact that the contingent consideration liability and other liability are calculated at fair value. The fair value calculation includes certain discount rates and other factors that impact the value of these liabilities (see Note 3). The calculated fair value is based on the total payments that the Company expects to pay in the future rather than the total maximum payments that it could be required to pay. As of June 30, 2024, the table below highlights the other liability and contingent consideration recorded on the Company's balance sheet (as discounted) compared to the undiscounted estimated payout and the maximum payout of cash and stock that could occur if all future contingent earn-out provisions from the acquisitions were achieved:

Total

Liabilities recorded on balance sheet, June 30, 2024:

*Includes estimate for future Pagefield payments based on June 30, 2024 exchange rate of GBP/USD

**At fair value

^Management's estimate as of June 30, 2024 of the future payments of cash and stock for earn-out payments

#The maximum amount of future payments of cash and stock for earn-out payments

NOTE 8 OMNIBUS INCENTIVE PLAN

As of June 30, 2024, the total amount of shares authorized by the Board of Directors under the Omnibus Plan was 17,965,696 with a total of 5,747,462 available for issuance. During the six months ended June, 30 2024 and 2023 the Company granted 345,000 and 652,000 Options to employees. During the year ended December 31, 2023 the Company granted 652,000 Options to employees. In addition, during the six months ended June 30, 2024 and 2023 the Company granted 2,930,000 and 1,500,000 restricted stock units ("RSUs"), and 703,737 and 820,007 restricted stock awards ("RSAs"), respectively. During the year ended December 31, 2023, the Company granted 2,250,000 RSUs and 3,008,951 RSAs. The stock options have a contractual term of ten years and vest three years after their issuance. The RSUs vest over a three-year period with one-third vesting each year after the grant date. 820,007 RSAs vested on December 31, 2023, 50,000 RSAs vest in October 2024, 703,737 vest in May 2025, and 2,138,944 RSAs vest over a five year period beginning with approximately 428,000 per year starting in October 2024, with 1,961,497 fully vested by October 2028 and 177,447 fully vested by December 2028. The RSAs include voting and dividend rights prior to vesting.

Options

The expected volatility rates are estimated based on the actual volatility of comparable public companies over the expected term. The expected term represents the average time that Options that vest are expected to be outstanding. Due to limited historical data, the Company calculates the expected life based on the midpoint between the vesting date and the contractual term, which is in accordance with the simplified method. The risk-free rate is based on the United States Treasury yield curve during the expected life of the option. The following summarizes the stock option activity for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023:

The following summarizes the Option activity:

Weighted

The following table summarizes certain information about the stock options outstanding and exercisable as of June 30, 2024:

Option expense for the six months ended June 30, 2024 and 2023 and for the year ended December 31, 2023 was approximately $264,000, 269,000 and $518,000, respectively. As of June 30, 2024, there was approximately $663,000 of total unrecognized compensation cost related to non-vested stock option compensation expense, which is expected to be recognized over a weighted-average period of 1.3 years.

Restricted Stock Units ("RSUs")

Determining the appropriate fair value model and the related assumptions requires judgment. The fair value of each RSU granted is estimated using a Black-Scholes option-pricing model on the date of grant as follows:

Activity in the Company's non-vested RSUs for the six months ended June 30, 2024 and 2023, and the year ended December 31, 2023 was as follows:

Weighted

Average Grant Date

RSU expense for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023, was approximately $567,000, $83,000 and $553,000, respectively. As of June 30, 2024, there was approximately $6,179,000 of total unrecognized compensation cost related to non-vested RSU arrangements, which is expected to be recognized over a weighted-average period of 1.8 years.

Restricted Stock Awards ("RSAs")

Determining the appropriate fair value model and the related assumptions requires judgment. The fair value of each RSA granted is estimated using a Black-Scholes option-pricing model on the date of grant as follows:

Activity in the Company's non-vested RSAs for the six months ended June 30, 2024 and 2023, and for the year ended December 31, 2023 was as follows:

Weighted

Average Grant Date

RSA expense for the six months ended June 30, 2024 and 2023 and for the year ended December 31, 2023, was approximately $459,000, $231,000, and $1,435,000, respectively. As of June 30, 2024, there was approximately $3,329,000 of total unrecognized compensation cost related to non-vested RSA arrangements, which is expected to be recognized over a weighted-average period of 2.2 years.

Stock Appreciation Rights ("SARs")

During the six months ended June 30, 2023, the Company issued 1,825,000 SARs to employees. During the year ended December 31, 2023, the Company issued 1,850,000 SARs to employees. There were no SARs issued during 2024. SARs are not issued shares or committed shares to be issued and therefore do not count against the total number of shares that can be issued under the Omnibus Plan. Upon exercise of a SAR, the Company shall pay the grantee in cash an amount equal to the excess of the fair market value of a share of stock on the effective date of exercise in excess of the exercise price of the SAR. This cash settlement feature requires the SARs to be classified as a liability and marked to market at each reporting period. The SARs vest over a three-year period with one-third vesting each year after the grant date. Determining the appropriate fair value model and the related assumptions requires judgment. The fair value of each SAR granted is estimated using a Black-Scholes option-pricing model and the fair value is adjusted at each reporting period. Each SAR has a cash settlement feature and is recorded as a liability in the Company's consolidated balance sheets. As of June 30, 2024, June 30, 2023, and December 31, 2023, the total liability recorded was $366,000, $71,000 and $290,000, respectively. The fair value of the SARs was calculated as follows as of:

SAR expense for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023, was approximately $76,000, $71,000 and $290,000, respectively. The amount of the future expense for all SARs issued will depend upon the value of the Company's common stock and other factors at each future reporting date.

NOTE 9 INCOME TAXES

The components of income tax expense attributable to income before income taxes for six months ended June 30, 2024 and 2023, and the year ended December 31, 2023, consisted of the following:

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. The acquisitions of KP LLC, Engage, Multistate and LPA were taxable asset acquisitions. As such, the purchase consideration for these acquisitions generated tax-deductible goodwill in the combined amount of approximately $41,331,000. A deferred tax asset has been recorded in relation to the excess of the tax deductible goodwill as compared to the GAAP carrying value of goodwill. Of the $41,331,000 of tax deductible goodwill, approximately $29,016,000 is eligible for amortization during the 2024 tax year. None of the goodwill recorded in connection with the acquisition of Pagefield is deductible for tax purposes.

As of June 30, 2024, 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 June 30, 2024, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company's 2021 to 2023 domestic income tax return years are open under the statute of limitations for examination by the taxing authorities. Additionally, the Company's income tax return for Pagefield for the years 2020 to 2023 are open under the statute of limitations for examination by the applicable taxing authorities.

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

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 for the six months ended June 30, 2024 and 2023, and the year ended December 31, 2023, is as follows:

NOTE 10 RETIREMENT PLAN

NOTE 11 SEGMENT REPORTING

As of June 30, 2024, the Company has three reportable segments; Government Relations Consulting, Public Affairs Consulting and Diversified Services. Government Relations 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. Diversified Services were introduced with the acquisition of MS LLC, and currently include Lobbying Compliance services and Legislative Tracking.

Other is primarily comprised of depreciation, amortization, interest expense, taxes, share-based accounting charges, post-combination compensation charges, long term incentive program charges, and gain on bargain purchase. The Company's CODM does not evaluate these items at the segment level.

The Company measures the results of its segments using, among other measures, each segment's net revenue and contribution margin, which excludes depreciation, amortization, interest expense, taxes and other non-cash charges. The Company's CODM does not evaluate total assets and liabilities at the segment level but rather evaluates these items on a consolidated basis. Information for the Company's segments, as well as for other, including the reconciliation to net income (loss) is provided in the following tables:

For the Six Months Ended June 30, 2024