Quarterly report pursuant to Section 13 or 15(d)

Share Based Compensation

v3.23.3
Share Based Compensation
9 Months Ended
Sep. 30, 2023
Share Based Compensation [Abstract]  
Share Based Compensation

Note 11 — Share Based Compensation

 

On July 25, 2023, the Board of Directors of the Company approved the PSQ Holdings, Inc. 2023 Stock Incentive 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, $0.0001 par value per share, of the Company (the “Class A Common Stock”) 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, $0.0001 par value per share (“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) 1% 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

 

During the three months ended September 30, 2023, 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.

 

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 nine-month period ended September 30, 2023 is presented below:

 

    Number of
RSUs
    Weighted
Average Grant
Date Value
 
Unvested as of January 1, 2023    
-
     
 
 
Granted     3,115,989     $ 10.12  
Vested     (131,568 )    
 
 
Unvested as of September 30, 2023     2,984,421     $ 10.12  

 

As of September 30, 2023, unrecognized compensation cost related to the grant of RSUs was approximately $22.4 million. Unvested outstanding RSUs as of September 30, 2023 had a weighted average remaining vesting period of 3.0 years.

 

Share based compensation relating to earn-out

 

As more fully described in Note 1, certain executive officers, employees and service providers of PSQ will be entitled to receive up to 3,000,000 shares of Class A Common Stock (the “Earnout Shares”) in the event certain trading price-based metrics are satisfied during the five (5)-year period commencing on the date of the Closing and ending on the fifth anniversary thereof (the “Earnout Period”), or, if earlier, upon the occurrence of a change of control transaction (as defined in the Merger Agreement) during the Earnout Period with an implied per share price that exceeds the relevant trading price-based metrics.

 

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:

 

    As of 9/30/2023  
PSQH Stock Price   $ 9.08  
Volatility     40 %
Risk free rate of return     4.6 %
Expected term (in years)     4.8  

 

During the three and nine months ended September 30, 2023, the Company recorded $767,719 of share-based compensation expense, related to the earn-out shares.

 

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  
Transaction incurred in connection with the Business Combination     910,800  
Research and development     201,810  
Sales and marketing     393,323  
    $ 2,095,889