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Share Based Compensation
 6 Months Ended
Jun. 30, 2024
Share Based Compensation [Abstract]  
Share Based Compensation

Note 13 - Share Based Compensation

 

On July 25, 2023, the Board of Directors of the Company approved the PSQ Holdings, Inc. 2023 Stock Incentive Plan (the “Plan”) as well as the 2023 Employee Stock Purchase Plan, whereby it may grant to certain employees, consultants and advisors an award, such as (a) incentive stock options, (b) non-qualified stock options, (c) restricted stock and (d) RSUs, of the Company.

 

2023 Stock incentive plan

 

Awards may be made under the Plan for up to such number of shares of Class A Common Stock of the Company as is equal to the sum of:

 

(A) a number of shares of Class A Common Stock equal to fifteen percent (15%) of the outstanding shares of all classes of Company Common Stock, determined immediately following the closing of the Merger Agreement.

 

(B) an annual increase to be added on the first day of each fiscal year, commencing on January 1, 2024 and continuing for each fiscal year until, and including, January 1, 2033, equal to the lesser of (i) 5% of the outstanding shares of all classes of Company Common Stock on such date and (ii) the number of shares of Class A Common Stock determined by the Board.

 

2023 Employee Stock Purchase plan

 

The purpose of this plan is to provide eligible employees opportunities to purchase shares of the Company’s Class A Common Stock. For this purpose, the Board approved 600,000 shares of Class A Common Stock, plus an annual increase to be added on the first day of each fiscal year, commencing on January 1, 2024 and continuing for each fiscal year until, and including, January 1, 2033, equal to the least of (i) 425,000 shares of Class A Common Stock, (ii) 1% of the outstanding shares of all classes of Company common stock, $0.0001 par value per share, on such date and (iii) a number of shares of Class A Common Stock determined by the Board.

 

Restricted Stock Units

 

There were no RSUs granted during the three and six months ended June 30, 2023. During the three and six months ended June 30, 2024, the Company issued RSU’s under the 2023 Stock Incentive Plan to employees, advisors, and board of directors. Each RSU entitles the recipient to one share of our common stock upon vesting. The Company measures the fair value of RSUs using the stock price on the date of grant.

 

In May 2024, the Company issued 50,000 RSUs to an executive with a performance condition based on a revenue target. These awards become vested and nonforfeitable one year from the satisfaction of such revenue target. As of June 30, 2024, the Company considered this performance condition as not probable and therefore no stock-based compensation expense was recorded.

 

Share-based compensation expense for RSUs is recorded ratably over their vesting period.

 

A summary of the activity with respect to, and status of, RSUs during the three and six-month period ended June 30, 2024 is presented below:

 

   Number of
RSUs		   Weighted
Average Grant
Date Value		 
Unvested as of January 1, 2024   1,655,542   $9.61 
Granted   2,276,710    8.10 
Forfeited   (108,000)   10.12 
Vested   (638,629)   6.91 
Unvested as of March 31, 2024   3,185,623   $8.93 
Granted   490,140    3.48 
Forfeited   (5,000)   10.12 
Vested   (642,204)   6.44 
Unvested as of June 30, 2024   3,028,559   $6.65 

 

As of June 30, 2024 and December 31, 2023 there were 5,008,839 and 2,354,989 RSUs outstanding, respectively.

 

As of June 30, 2024, unrecognized compensation cost related to the grant of RSUs was approximately $24.5 million. Unvested outstanding RSUs as of June 30, 2024 had a weighted average remaining vesting period of 1.72 years.

 

Share based compensation relating to earn-out

 

In accordance with ASC 718, these are awards granted with a market condition. The effect of this market condition was reflected in the grant-date fair value of an award. The fair value of the earnout shares was estimated using a Monte Carlo simulation utilizing assumptions related to the contractual term of the instruments, estimated volatility of the price of the Common Stock and current interest rates. Below are the key assumptions used in valuing the earnout shares:

 

   As of
7/19/2023		 
PSQH Stock Price  $9.08 
Volatility   40.0%
Risk free rate of return   4.6%
Expected term (in years)   4.8 years 

 

The Company recorded $914,063 and $1,828,125 for the three and six months ended June 30, 2024, respectively, of share-based compensation expense, related to the earnout shares. As of June 30, 2024, unrecognized compensation cost related to the earnout shares was approximately $14,030,000. No share-based compensation expenses were recognized during the three and six months ended June 30, 2023.

 

During the three and six months ended June 30, 2024, the Company recorded the following share-based compensation expense, related to RSUs, earnout shares and Credova Merger:

 

   For the   For the 
   three months   six months 
   ended   ended 
   June 30,   June 30, 
   2024   2024 
Cost of sales  $56,011   $79,985 
General and administrative expenses   3,217,865    5,855,998 
Research and development   416,871    737,986 
Sales and marketing   1,481,014    3,496,807 
Transaction costs incurred in connection with Credova Merger   
-
    887,409 
   $5,171,761   $11,058,185