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.

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.

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.

There were no RSUs granted during the three and nine months ended September 30, 2023. During the three and nine months ended September 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.

A summary of the activity with respect to, and status of, RSUs during the three and nine-month period ended September 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
Granted	150,000	2.71
Forfeited	(133,981)	7.01
Vested	(609,336)	6.02
Unvested as of September 30, 2024	2,435,242	$	6.64

As of September 30, 2024, unrecognized compensation cost related to the grant of RSUs was approximately $19.2 million. Unvested outstanding RSUs as of September 30, 2024 had a weighted average remaining vesting period of 1.78.

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 earn-out 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 earn-out shares:

The Company recorded $0.9 million and $2.7 million for the three and nine months ended September 30, 2024, respectively, of share-based compensation expense, related to the earn-out shares. As of September 30, 2024, unrecognized compensation cost related to the earn-out shares was approximately $13.1 million. During the three and nine months ended September 30, 2023, the Company recorded $0.8 million of share-based compensation expense, related to the earn-out shares.

During the three and nine months ended September 30, 2024, the Company recorded the following share-based compensation expense, related to RSUs, earn-out shares and Credova Merger:


	For the three months ended September 30, 2024		For the nine months ended September 30, 2024
Cost of sales	$	28,407	$	108,392
General and administrative expenses	4,092,365		9,948,361
Research and development	411,470		1,149,456
Sales and marketing	1,264,581		4,761,388
Transaction costs incurred in connection with Credova Merger	—		887,409
	$	5,796,823	$	16,855,006

During the three and nine months ended September 30, 2023, the Company recorded the following share-based compensation expense, related to RSUs and earn-out shares:


	For the three and nine months ended September 30, 2023
Cost of sales	$	2,239
General and administrative expenses	587,717
Research and development	201,810
Sales and marketing	393,323
Transaction incurred in connection with the Business Combination	910,800
	$	2,095,889