PSQ Holdings Inc

Previous wording

Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “PSQ,” “we,” “us,” “our,” and the “Company” are intended to refer to (i) following the Business Combination, the business and operations of PSQ Holdings, Inc. and its consolidated subsidiaries, and (ii) prior to the Business Combination, Private PSQ (the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiaries.

Current wording

Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to "PublicSquare," “we,” “us,” “our,” and the “Company” are intended to refer to (i) following the Business Combination, the business and operations of PSQ Holdings, Inc. and its consolidated subsidiaries, and (ii) prior to the Business Combination, Private PSQ (the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiaries.

Previous wording

We incorporated PSQ Holdings, Inc. in February of 2021, began development of our digital platform (mobile app and website) in May 2021 and launched our initial product regionally in San Diego County, California in October 2021 on iOS, Android and on our website. After 10 months of testing in various markets and courting member feedback, we launched the Platform nationwide on July 4, 2022. As of December 31, 2023, on the Platform we have more than 1.6 million active consumer members (defined as unique consumer membership accounts for which we have received all required contact information and which have not been deactivated or deleted since our reception) and more than 75,000 business members from a wide variety of industries.

Current wording

We incorporated PSQ Holdings, Inc. in February of 2021, began development of our digital platform (mobile app and website) in May 2021 and launched our initial product regionally in San Diego County, California in October 2021 on iOS, Android and on our website. After 10 months of testing in various markets and courting consumer feedback, we launched the Platform nationwide on July 4, 2022.

Previous wording

On February 23, 2023, PSQ completed a stock-for-stock transaction to purchase 100% of the outstanding shares of EveryLife, Inc. (“EveryLife”), a Delaware corporation, in exchange for 1,071,229 shares of common stock, par value $0.001 per share, of Private PSQ (“Private PSQ Common Stock”).

Current wording

On February 23, 2023, PublicSquare completed a stock-for-stock transaction to purchase 100% of the outstanding shares of EveryLife, Inc. (“EveryLife”), a Delaware corporation, in exchange for 1,071,229 shares of common stock, par value $0.001 per share, of Private PSQ.

Previous wording

On July 19, 2023 (the “Closing Date”), we consummated the Business Combination, pursuant to the terms of the Merger Agreement.

Current wording

On July 19, 2023 (the “Closing Date”), we consummated the transactions contemplated by that Agreement and Plan of Merger, dated as of February 27, 2023 (the “Merger Agreement”), each by and among PublicSq. Inc. (f/k/a PSQ Holdings, Inc.), a Delaware corporation (“Private PSQ”), Colombier Acquisition Corp., a Delaware corporation (“Colombier”), Colombier-Liberty Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of Colombier (“Merger Sub”), and Colombier Sponsor, LLC (the “Colombier Sponsor”), a Delaware limited liability company, in its capacity as purchaser representative, for the purposes set forth in the Merger Agreement, which, among other things, provided for the merger of Private PSQ into Merger Sub with Private PSQ surviving the merger as a wholly owned subsidiary of Colombier (the “Business Combination”). At the closing of the Business Combination (the “Closing”), Colombier changed its name to “PSQ Holdings, Inc.”

Previous wording

On March 13, 2024 , the Company entered into an agreement and plan of merger (the “Credova Merger Agreement”) with Cello Merger Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub” and, together with PSQ, the “Buyer Parties”), Credova Holdings, Inc., a Delaware corporation (“Credova”), and Samuel L. Paul, in the capacity as the Seller Representative in accordance with the terms of the Credova Merger Agreement (“Credova Merger”).

Current wording

On March 13, 2024, we entered into an agreement and plan of merger (the “Credova Merger Agreement”) with Cello Merger Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”), Credova Holdings, Inc., a Delaware corporation (“Credova”), and Samuel L. Paul, in the capacity as the Seller Representative in accordance with the terms of the Credova Merger Agreement. Pursuant to the Credova Merger Agreement, on March 13, 2024, the transactions which are the subject of the Credova Merger Agreement were consummated (the “Credova Closing”) and Merger Sub merged with and into Credova (the “Merger”), with Credova surviving as a wholly-owned subsidiary of PublicSquare. In connection with the Merger, each share of Credova was converted into the right to receive newly-issued shares of our Class A common stock (“Class A Common Stock”), delivered to the Credova stockholders at the Credova Closing (“Credova Stockholders”). As consideration for the Merger, Credova stockholders received 2,920,993 newly-issued shares of Class A Common Stock (the “Consideration Shares”). A number of Consideration Shares equal to ten percent (10%) of the Consideration Shares (the “Escrow Shares”) was placed in an escrow account for indemnity claims made under the Credova Merger Agreement. Assuming they are not subject to indemnity claims, the Escrow Shares remaining in escrow upon the 12-month anniversary of the Credova Closing will be released and distributed pro rata to the former stockholders of Credova.

Previous wording

The mailing address of PSQ’s principal executive office is 250 S. Australian Avenue, Suite 1300, West Palm Beach, Florida 33401.

Current wording

The mailing address of PublicSquare's principal executive office is 1501 Belvedere Rd, Suite 500, West Palm Beach, Florida 33406.

Previous wording

During the years ended December 31, 2023 and 2022, our net loss was $53.3 million and $7.0 million, respectively. Our net loss increased in 2023 from 2022, largely due to the $14.6 million increase in the fair value of the convertible notes, $1.3 million increase in fair value of the warrant liabilities, as well as $6.8 million related to transaction costs incurred due to the business combination and $6.7 million of share-based compensation incurred, this was partially offset by a $1.7 million decrease in fair value of the earn-out liabilities. Our operating expenses will likely increase in the future as we develop and launch new offerings and platform features, expand in existing and new markets, increase our sales and marketing efforts and continue to invest in the Platform, as well as a result of becoming a public company. We have not been profitable since inception, and as of December 31, 2023 and December 31, 2022, our accumulated deficit was $62.2 million and $8.9 million, respectively. Since inception, we have financed our operations primarily through equity and debt raises.

Current wording

During the years ended December 31, 2024 and 2023, our net loss was $57.7 million and $53.3 million, respectively. Our net loss increased in 2024 from 2023, largely due to the growth of the Company resulting in an operating loss of $55.7 million in 2024 compared to $39.3 million in 2023. This was partially offset by the decrease in the change in fair value of the promissory note of $14.6 million and the increase in interest expense of $2.1 million. Our operating expenses will likely increase in the future as we develop and launch new offerings and platform features, expand in existing and new markets, increase our sales and marketing efforts and continue to strategically invest in our three segments. We have not been profitable since inception, and as of December 31, 2024 and December 31, 2023, our accumulated deficit was $119.9 million and $62.2 million, respectively. Since inception, we have financed our operations primarily through equity and debt raises.

Previous wording

Cost of sales- services (exclusive of depreciation and amortization) consists of the direct costs incurred in building and running the Platform. We recognize the cost of revenue associated with personnel costs, general administrative expenses, and fees related to servers that assist in hosting the Platform.

Current wording

Cost of revenue (exclusive of depreciation and amortization) consists of the direct costs incurred in building and running the Marketplace Platform, as well as underwriting and transaction costs related to our FinTech segment.

Previous wording

Operating expenses primarily include general and administrative, sales and marketing, research and development, and depreciation and amortization. The most significant component of our operating expenses is personnel-related costs such as salaries, benefits, share-based and variable compensation. We expect our personnel-related costs as a percentage of total costs to decrease over time.

Current wording

Operating expenses primarily include general and administrative, sales and marketing, research and development, and depreciation and amortization. The most significant component of our operating expenses is personnel-related costs such as salaries, benefits, share-based and variable compensation.

Previous wording

We expect to continue to invest substantial resources to support our growth. We anticipate that each of the following categories of operating expenses, other than transaction costs incurred in connection with the Business Combination, will increase in absolute dollar amounts and decrease as a percentage of revenue for the foreseeable future.

Current wording

As we are a high-growth company with a focus on cost-saving measures including resource reduction and reallocation, we anticipate that each of the following categories of operating expenses will increase in absolute dollar amounts but decline as a percentage of revenue for the foreseeable future.

Previous wording

General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources and administrative personnel, as well as the costs of information technology, professional services, insurance, travel, and other administrative expenses. We expect to invest in our corporate organization and incur additional expenses associated with transitioning to, and operating as, a public company, including increased legal, audit, tax and accounting costs, investor relations costs, higher insurance premiums and compliance costs. As a result, we expect that general and administrative expenses will increase in absolute dollars in future periods but decline as a percentage of total revenue over time. Our inability to scale our expenses could negatively impact profitability.

Current wording

General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources and administrative personnel, as well as the costs of information technology, professional services, insurance, travel, and other administrative expenses. We expect to continue incurring expenses associated with operating as a public company, including legal, audit, tax and accounting costs, investor relations costs, insurance premiums and compliance costs. As a result of cost-saving measures, we expect that general and administrative expenses will increase in absolute dollars in future periods but decline as a percentage of total revenue over time. Our inability to scale our expenses could negatively impact profitability.

Previous wording

Sales and marketing expenses consist primarily of salaries, employee benefits, consultant fees, commissions, and direct marketing costs related to the promotion of PSQ’s platforms/solutions and certain costs related to the acquisition of both consumer and business members on the Platform. As a result, we expect that sales expenses will increase in absolute dollars in future periods as we increase marketing activities, grow our operations, and continue to build our brand awareness, but decline as a percentage of total revenue over time. Our inability to scale our expenses could negatively impact profitability.

Current wording

Sales and marketing expenses consist primarily of salaries, employee benefits, consultant fees, commissions, and direct marketing costs related to the promotion of PSQ’s platforms/solutions. As a result of cost-cutting efforts, we expect that sales and marketing expenses will remain steady in absolute dollars in future periods as we scale back paid marketing efforts and focus on monetizing current customer base, and decline as a percentage of total revenue over time. Our inability to scale our expenses could negatively impact profitability.

Previous wording

Research and development expenses consist primarily of salaries, employee benefits and consultant fees related to our development activities to originate, develop, and enhance the Platform. We expect research and development expenses to increase over time due to growth in our engineering and product teams, especially related to the continued development of e-commerce functionality.

Current wording

Research and development expenses consist primarily of salaries, employee benefits and consultant fees related to our development activities to originate, develop, and enhance the Platform and build the PSQ Payments ecosystem. As this is a large focus of the Company, we expect that research and development expenses will increase in absolute dollars in future periods but decline as a percentage of total revenue over time.

Previous wording

Changes in the fair value of earnout liabilities are recorded in the consolidated statement of operations. The earn-out liabilities represent a financial instrument other than an outstanding share that embodies a conditional obligation that the issuer must or may settle by issuing a variable number of its equity shares. We record the earnout liability at its fair value at each reporting period.

Current wording

Changes in the fair value of earn-out liabilities are recorded in the consolidated statement of operations. The earn-out liabilities represent a financial instrument other than an outstanding share that embodies a conditional obligation that the issuer must or may settle by issuing a variable number of its equity shares. We record the earn-out liability at its fair value at each reporting period.

Previous wording

Cost of goods sold (exclusive of depreciation and amortization) increased by $2.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was mainly due to the launch of product sales in July 2023.

Current wording

Cost of revenue (exclusive of depreciation and amortization) increased by $0.6 million, or 32%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was primarily related to the addition of the Financial Technology segment in 2024.

Previous wording

General and administrative expense increased by $13.2 million, or 655%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was due to the growth and expansion of our operations as well as costs related to being a public company, specifically a $7.2 million increase in staffing-related costs, a $2 million increase in professional services, a $1 million increase in software costs, a $0.8 million increase in insurance costs, and $0.6 million increase in acquisition costs as well as a $1.6 million increase in other administrative expenses.

Current wording

General and administrative expense increased by $28.1 million, or 185%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was due to the growth and expansion of our operations, specifically a $10.0 million increase due to the addition of the FinTech segment, $12.9 million increase in staffing-related costs of which $9.4 million was share-based compensation, a $2.7 million increase in professional services, a $0.9 million increase in insurance costs as well as a $1.6 million increase in other administrative expenses.

Previous wording

Sales and marketing expense increased by $9.5 million, or 374%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was due to an increase in expenses related to the Outreach Program, as well as brand awareness campaigns.

Current wording

Sales and marketing expense increased by $6.7 million, or 55%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was due to a $3.1 million increase in expenses related to brand awareness and advertising campaigns along with $4.0 million increase in stock-based compensation and $0.6 million increase in staffing costs coupled with a decrease in contractor support of $1.0 million.

Previous wording

Depreciation and amortization expense increased $1.6 million, or 190% for year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily related to the amortization of capitalized software development costs.

Current wording

Depreciation and amortization expense increased $0.8 million, or 33% for year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was primarily related to the amortization of capitalized software development costs.

Previous wording

The change in fair value of convertible promissory notes represents the premium recorded on the convertible promissory note’s date with a charge to expense. The convertible promissory notes were converted to equity at the close of the Business Combination.

Current wording

The change in fair value of convertible promissory notes represents the premium recorded on the convertible promissory note’s date with a charge to expense. The convertible promissory notes were converted to equity at the close of the Business Combination and therefore no expense was recognized in 2024.

Previous wording

Income tax expense increased by an insignificant amount for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Current wording

Income tax expense decreased by an insignificant amount for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Previous wording

Historically, we have financed operations primarily through cash generated from equity and debt raises. Our primary short-term requirements for liquidity and capital are to fund general working capital and capital expenditures. Our principal long-term working capital uses include increasing our advertising and marketing exposure, expanding our internal engineering and product teams, developing and launching direct-to-consumer (“D2C”) products, and developing and rolling out e-commerce capabilities.

Current wording

Historically, we have financed operations primarily through cash generated from equity and debt raises. Our primary short-term requirements for liquidity and capital are to fund general working capital and capital expenditures. Our principal long-term working capital uses include enhancing our product offerings, expanding our internal engineering and product teams, and advantageous utilization of our balance sheet for loan and lease activity.

Previous wording

As of December 31, 2023 and December 31, 2022, our cash and cash equivalents balance was $16.4 million, and $2.3 million, respectively. Cash and cash equivalents consist of interest-bearing deposit accounts managed by third-party financial institutions, and highly liquid investments with maturities of one year or less.

Current wording

As of December 31, 2024 and December 31, 2023, our cash and cash equivalents balance was $36.3 million, and $16.4 million, respectively. Cash and cash equivalents consist of interest-bearing deposit accounts managed by third-party financial institutions, and highly liquid investments with maturities of one year or less.

Previous wording

On March 13, 2024, the Company entered into a note purchase agreement for a 9.75% private placement convertible note for $10,000,000 invested by a board member and his affiliates. Terms for the note were priced based on notes exchanged as part of the Credova transaction. The funds are currently held in escrow and the investment is subject to stockholder approval of the issuance of the underlying shares as part of the Company's annual shareholder meeting.

Current wording

On March 13, 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 transaction.

Previous wording

Also in March 2024, we completed an acquisition of Credova in exchange for the issuance of shares of our common stock. Additionally, Credova generates positive cash flow from operations.

Current wording

Also in March 2024, we completed an acquisition of Credova in exchange for the issuance of shares of our common stock. Additionally, Credova has historically generated positive cash flows from operations.

Previous wording

We believe that as a result of the Business Combination, convertible note proceeds, and acquisition of Credova, our existing cash and short-term investments will be sufficient to fund operations and capital needs for at least one year from the date the consolidated financial statements were issued for the year ended December 31, 2023.

Current wording

We believe that, as a result of these initiatives, along with our existing cash and cash equivalents, the Company will be able to fund operations and capital needs for the next year from the date these consolidated financial statements were available to be issued.

Previous wording

Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and extent of spending by us to support further sales and marketing and research and development efforts, the degree to which we are successful in launching new business initiatives such as our e-commerce and D2C business initiatives and the cost associated with these initiatives, and the growth of our business generally. In order to finance these opportunities and associated costs, it is possible that we will need to raise additional financing if the proceeds realized by us from the Merger are insufficient to support our business needs. While we believe that the proceeds realized by us through the Merger will be sufficient to meet our currently contemplated business needs, we cannot assure you that this will be the case. If additional financing is required by us from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital on acceptable terms when needed, our business, results of operations and financial condition would be materially and adversely affected.

Current wording

Our future capital requirements will depend on many factors including our revenue growth rate and the timing and extent of spending to support further sales and marketing and research and development efforts. In order to finance these opportunities, we may need to raise additional financing. While there can be no assurances, the Company may need to pursue additional equity raises and debt rounds of financing. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to the Company or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be materially and adversely affected.

Previous wording

Net cash used in operating activities for the year ended December 31, 2023 was $25.8 million compared to $6.0 million used in operating activities during the year ended December 31, 2022. The increase in cash used in operating activities was due to an overall increase in operating expenses, resulting in an increased net loss of $53.3 million (which includes the increase in fair value of Notes of $14.6 million and change in fair value of the warrants of $1.3 million). This was partially offset with a decrease in fair value of earn-out liabilities of $1.7 million, an increase in non-cash expenses of $1.6 million for depreciation and amortization and share-based compensation of $6.7 million. Also offsetting this was an increase in cash provided by operating assets and liabilities of $4.1 million.

Current wording

Net cash used in operating activities for the year ended December 31, 2024 was $34.1 million compared to $25.8 million used in operating activities during the year ended December 31, 2023. The increase in cash used in operating activities was due to an overall increase in operating expenses, resulting in an increased operating loss of $16.4 million. Also, there was an increase in net cash used by operating assets and liabilities of $6.8 million. This was partially offset with a decrease in fair value of earn-out liabilities of $1.7 million, an increase in non-cash expenses of $0.8 million for depreciation and amortization and share-based compensation of $14.0 million.

Previous wording

Net cash provided by financing activities for year ended December 31, 2023 was $43.2 million compared to $9.5 million provided by financing activities for the year ended December 31, 2022. The increase was primarily due to $22.5 million of proceeds from the issuance of Notes, $18.1 million of proceeds from the reverse recapitalization and $2.6 million of proceeds from the issuance of Private PSQ Common Stock.

Current wording

Net cash provided by financing activities for year ended December 31, 2024 was $57.3 million compared to $43.2 million provided by financing activities for the year ended December 31, 2023. The increase was primarily due to $39.3 million of proceeds from the issuance of common stock, $20.0 million of proceeds from the issuance of convertible note payable, partially offset by repayments on the line of credit of $8.6 million in 2024, compared to $22.5 million of proceeds from the issuance of convertible note payable, $18.1 million of proceeds from the reverse recapitalization and $2.6 million of proceeds from the issuance of common stock in 2023.

Previous wording

The non-GAAP financial measures below have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, Adjusted EBITDA should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

Current wording

The non-GAAP financial measures below have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

Previous wording

The Platform features a single cart shopping experience where consumers can purchase a variety of products from multiple vendors in one transaction. The Company is not the seller of record in these transactions. The commissions revenue earned from these arrangements are recognized on a net basis, which equates to the commission and processing fees earned in exchange for the seller marketplace services. The commission and processing fees are recognized when the corresponding transaction is confirmed by the buyer and seller. The Company does not take title to inventory sold or assume risk of loss at any point in time during the transaction and is authorized to collect consideration from the buyer and remit net consideration to the seller to facilitate the processing of the confirmed purchase transaction.

Current wording

The Platform features a single cart shopping experience where consumers can purchase a variety of products from multiple vendors in one transaction. The Company is not the seller of record in these transactions. The commissions revenue earned from these arrangements are recognized on a net basis, which equates to the commission and processing fees earned in exchange for the seller marketplace services. The commission and processing fees are recognized when the corresponding transaction is confirmed by the buyer and seller. The Company does not take title to inventory sold or assume risk of loss at any point in time during the transaction and is authorized to collect consideration from the buyer and remit net consideration to the seller to facilitate the processing of the confirmed purchase transaction. The Company currently records processing fees from its merchant service providers as a component of Cost of sales - services on the consolidated statement of operations.

Previous wording

Advertising revenue is generated by displaying ad products and services on the Company’s platform. Customers enter into advertising subscription arrangements. The Company recognizes revenues over-time as the ads are displayed over the subscription period so the Company is providing a service and the service is being consumed by the customer simultaneously over the period of service. In general, we report advertising revenue on a gross basis, since we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers.

Current wording

The Company enters into advertising subscription arrangements with its customers. Revenue is recognized over-time as the ads are displayed over the subscription period. The Company is providing a service and the service is being consumed by the customer simultaneously over the period of service. In general, the Company reports advertising revenue on a gross basis, since the Company controls the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to customers.

Previous wording

The Company recognizes revenue from push notifications and email blasts at a point in time when delivered. Push notifications and email blasts are considered delivered when an ad is displayed to users. When a customer enters into an advertising subscription arrangement that includes push notifications and/or email blasts, the Company allocates a portion of the total consideration to the push notification and email blast performance obligations based on the residual approach.

Current wording

The Company also sells push notifications and email blasts and recognizes revenue at a point in time when delivered. Push notifications and email blasts are considered delivered when an ad is displayed to users. When a customer enters into an advertising subscription arrangement that includes push notifications and/or email blasts, the Company allocates a portion of the total consideration to the push notification and email blast performance obligations based on the residual approach.

Previous wording

The Company generates revenue through the sale of diapers and wipes to consumers by way of the Company’s website. The Company considers customer orders to be the contracts with the customer. There is a single performance obligation, which is the Company’s promise to transfer the Company’s product to customers based on specific payment and shipping terms in the arrangement. The entire transaction price is allocated to this single performance obligation. Product revenue is recognized when a customer obtains control of the Company’s product, which occurs at shipment. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products.

Current wording

The Company generates revenue through the sale of diapers, wipes and other baby products to consumers by way of the Company’s website. The Company considers customer orders to be the contracts with the customer. There is a single performance obligation, which is the Company’s promise to transfer the Company’s product to customers based on specific payment and shipping terms in the arrangement. The entire transaction price is allocated to this single performance obligation. Product revenue is recognized when a customer obtains control of the Company’s product, which occurs at shipment. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products.

Previous wording

Consistent with industry practice, the Company generally offers customers a limited right of return for products purchased. The Company reviews its receivables quarterly and records a reserve, if necessary.

Current wording

Consistent with industry practice, the Company generally offers customers a limited right of return for products purchased. The Company reviews its receivables quarterly and records a reserve, if necessary. As of December 31, 2024 and 2023, the Company had approximately $14,000 and $15,000, respectively, recorded as an allowance for sales returns.

Previous wording

The Company capitalizes costs related to the development of its internal accounting software and certain projects for internal use in accordance with ASC 350 -Intangibles – Goodwill and Other. The Company capitalizes costs to develop its mobile application and website when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed, and the software will be used as intended. Costs incurred during the preliminary planning and evaluation stage of the project and during the post implementation operational stage, including maintenance, are expensed as incurred. Costs incurred for enhancements that are expected to result in additional functionality are capitalized and expensed over the estimated useful life of the upgrades on a per project basis. Amortization is computed on an individual product basis over the estimated economic life of the product using the straight-line method. Software development costs expensed and not capitalized, which are included in research and development expense in the accompanying consolidated statements of operations, were approximately $1,078,000 and $170,000 for years ended December 31, 2023, and 2022, respectively.

Current wording

The Company capitalizes costs related to the development of its internal accounting software and certain projects for internal use in accordance with ASC 350 -Intangibles – Goodwill and Other. The Company capitalizes costs to develop its mobile application and website when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed, and the software will be used as intended. Costs incurred during the preliminary planning and evaluation stage of the project and during the post implementation operational stage, including maintenance, are expensed as incurred. Costs incurred for enhancements that are expected to result in additional functionality are capitalized and expensed over the estimated useful life of the upgrades on a per project basis. Amortization is computed on an individual product basis over the estimated economic life of the product using the straight-line method. Software development costs expensed and not capitalized, which are included in research and development expense in the accompanying consolidated statements of operations, were approximately $0.7 million and $1.1 million for years ended December 31, 2024 and 2023, respectively.

Previous wording

The Company recognizes an expense for share-based compensation awards based on the estimated fair value of the award on the date of grant.

Current wording

The Company recognizes an expense for share-based compensation awards based on the estimated fair value of the award on the date of grant. For certain awards, the Company has determined that the service inception date precedes the grant date as (a) the awards were authorized prior to establishing an accounting grant date, (b) the recipients began providing services prior to the grant date, and (c) there are performance conditions that, if not met by the accounting grant date, will result in the forfeiture of the awards. As the service inception date precedes the accounting grant date, the Company recognizes share-based compensation expense over the requisite service period based on the fair value at each reporting date. Forfeitures are accounted for when they occur. Modifications are approved by the Board and any incremental compensation cost is recognized in the period of occurrence.

Previous wording

The Company accounts for share-based compensation under the provisions of ASC Topic 718. As noted above, ASC Topic 718 requires that share-based payment transactions with employees and non-employees, in certain cases, be recognized in the consolidated financial statements based on their fair value. As of December 31, 2023 there were 2,354,989 units outstanding. At December 31, 2022, there were no board approved grants of share-based compensation awards.

Current wording

The Company accounts for share-based compensation under the provisions of ASC Topic 718. As noted above, ASC Topic 718 requires that share-based payment transactions with employees and non-employees, in certain cases, be recognized in the consolidated financial statements based on their fair value. As of December 31, 2024 and 2023 there were 3,386,082 and 2,354,989 RSUs outstanding, respectively.

Previous wording

Any contingent consideration (“Earnout liabilities”) is measured at fair value at the acquisition date. For contingent consideration that does not meet all the criteria for equity classification, such contingent consideration is required to be recorded at its initial fair value at the acquisition date, and on each balance sheet date thereafter. Changes in the estimated fair value of liability-classified contingent consideration are recognized on the consolidated statements of operations in the period of change.

Current wording

Any contingent consideration (“Earn-out liabilities”) is measured at fair value at the acquisition date. For contingent consideration that does not meet all the criteria for equity classification, such contingent consideration is required to be recorded at its initial fair value at the acquisition date, and on each balance sheet date thereafter. Changes in the estimated fair value of liability-classified contingent consideration are recognized on the consolidated statements of operations in the period of change.

Previous wording

Additionally, PSQ is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. PSQ will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter (if PSQ’s annual revenues exceeded $100 million during such completed fiscal year), or (ii) The market value of common stock held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter (if PSQ’s annual revenues did not exceed $100 million during such completed fiscal year). To the extent PSQ takes advantage of such reduced disclosure obligations, it may also make comparison of its financial statements with other public companies difficult or impossible.

Current wording

Additionally, PublicSquare is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. PublicSquare will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter (if PublicSquare’s annual revenues exceeded $100 million during such completed fiscal year), or (ii) The market value of common stock held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter (if PublicSquare’s annual revenues did not exceed $100 million during such completed fiscal year). To the extent PublicSquare takes advantage of such reduced disclosure obligations, it may also make comparison of its financial statements with other public companies difficult or impossible.