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Convertible Promissory Notes | 9 Months Ended
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Sep. 30, 2024
Debt Disclosure [Abstract] |
Convertible Promissory Notes | Revolving Line of Credit The Company assumed a $10.0 million revolving loan with a finance company through the Credova Merger (Note 5) which bears interest at a rate of 15% and requires minimum monthly interest payments. The funding termination date is June 30, 2024. The borrowing base is based upon a percentage of eligible receivables which are valued as the outstanding principal amount, less adjustments for loans held for investment that are more than thirty-one days but no more than sixty days past due. For calculating the borrowing base, receivables more than sixty days past due are excluded. The total amount that can be borrowed under the loan is reduced to the amount of the borrowing base if that amount is lower. On July 1, 2024 the Company entered into Amendment No. 5 to the Amended and Restated Loan and Security Agreement. The amendment extended the funding period for an additional 12 months beginning July 1, 2024. The line of credit will bear interest at an annual rate of 14.5% with minimum interest requirement. The borrowing base is set at 89% of the unpaid principal balance of pledge receivables that are no more than sixty days past due. The amendment contains customary covenants, trigger events, representations and warranties. Certain assets at Credova are assigned as collateral. The revolving line of credit maturity date is subsequent to the revolving period, which is the earlier of: (a) nine (9) months following the funding termination date (June 30, 2025) and (b) the remittance date on which the aggregate outstanding advances are $1.0 million or below. Monthly remittance remains in effect with a borrowing base calculation. During the amortization period, the Company will repay the aggregate outstanding advances until such aggregate outstanding advances do not exceed the borrowing base, and then 100% of the remaining collections until the aggregate outstanding advances have been reduced to zero. As of September 30, 2024, the outstanding advances under this revolving loan totaled $3.1 million. Convertible Promissory Notes Promissory Note Exchange Prior to the execution of the Credova Merger Agreement, Credova, PSQ and certain holders of outstanding subordinated notes (“Subdebt Notes”) issued by Credova (the “Participating Noteholders”) entered into a Note Exchange Agreement (the “Note Exchange Agreement”) pursuant to which, immediately prior to the Closing, the Participating Noteholders delivered their Subdebt Notes of Credova for cancellation, in exchange for newly-issued replacement notes issued by PSQ, convertible into shares of Class A Common Stock (the “Replacement Notes”). The Replacement Notes have 9.75% simple interest per annum and 10-year maturity dates. Pursuant to the terms of the Replacement Notes, at any time after the Closing, Participating Noteholders may elect to convert their Replacement Notes into a number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the outstanding principal amount of the Replacement Note to be converted plus accrued and unpaid interest by (y) 4.63641, subject to adjustment for stock splits and other similar transactions (the “Conversion Price”). At any time, the Company may call the Replacement Notes for a cash amount equal to accrued interest plus (i) between the Closing and the first anniversary of the Closing, 120% of the then outstanding principal amount, (ii) between the first anniversary and the second anniversary of the Closing, 105% of the then outstanding principal amount and (iii) after the second anniversary of the Closing, the then outstanding principal amount of the Replacement Note. Further, the Replacement Notes permit the Company, in its discretion, to require conversion of the Replacement Notes into shares of Class A Common Stock if the daily volume-weighted average trading price of the Company Class A Common Stock exceeds 140% of the Conversion Price on each of at least ten consecutive trading days during the twenty trading day period prior to notice of such required conversion. The Company determined the embedded derivatives did not require bifurcation. Credova Subdebt Notes not exchanged for Replacement Notes at Closing were canceled following payment in full in cash. As of September 30, 2024, the convertible promissory notes payable was $8.4 million. Convertible Promissory Notes – Related Party In March 2024, the Company entered into a note purchase agreement for a 9.75% private placement convertible note for $10.0 million invested by a board member and his affiliates. Terms for the note were priced based on notes exchanged as part of the Credova Merger described above. In August 2024, the Company entered into an agreement for a $10.0 million convertible note in a private placement with a board member and affiliates. The note has identical terms to the notes offered in March 2024 (see Note 12). Convertible Promissory Notes The Company had issued convertible promissory notes (the “Note” or “Notes”) in the total amount of $22.5 million that accrued interest at the rate of 5% per annum until converted or paid in full upon maturity being December 31, 2024. As described in Note 1, on July 19, 2023, the Company consummated the Business Combination and became a publicly-traded company at which time the balance under each Note converted automatically into shares of PSQ Common Stock at a conversion price per share based upon an implied $100 million fully diluted pre-money valuation, excluding the Notes. The Notes are required to be recorded at their initial fair value on the date of issuance under ASC 480-10-25-14, and each balance sheet date thereafter. Changes in the estimated fair value of the Notes are recognized as non-cash gains or losses in the condensed consolidated statements of operations. The change in the fair value of the Notes measured with Level 3 inputs through September 30, 2023 are summarized as follows:
| Convertible Promissory Notes
Fair value as of January 1, 2023 | $ | — |
Principal balance of convertible notes issued | 2,050,000 |
Change in valuation inputs or other assumptions | 1,147,905 |
Fair value as of March 31, 2023 | 3,197,905 |
Principal balance of convertible notes issued | 20,450,000 |
Change in valuation inputs or other assumptions | 13,423,204 |
Fair value as of June 30, 2023 | 37,071,109 |
Conversion of convertible notes | (37,071,109) |
Fair value as of September 30, 2023 | $ | — |
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
Exercise Price | $ | — |
Risk-Free Rate | 4.1 | %
Maturity (in years) | 1.8
Volatility | 75.0 | %

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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