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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K/A

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): March 13, 2024

 

PSQ Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   001-40457   86-2062844
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (I.R.S. Employer
Identification Number)

 

250 S. Australian Avenue, Suite 1300

West Palm Beach, Florida 33401

(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code: (877) 776-2402

 

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A common stock, par value $0.0001 per share   PSQH   New York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share   PSQH.WS   New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

 

 

EXPLANATORY NOTE

 

PSQ Holdings, Inc. (the “Company” or “we” or “us”) filed a Current Report on Form 8-K, with the Securities and Exchange Commission on March 14, 2024 (the “Original Filing”) to report the completion of its merger with Credova Holdings, Inc. (“Credova”), pursuant to the agreement and plan of merger dated March 13, 2024 (the “Credova Merger Agreement”), by and between Cello Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, Credova, and Samuel L. Paul, in the capacity as the seller representative, in accordance with the terms of the Credova Merger Agreement (the “Transaction”). In the Original Filing, we stated that required financial statements and pro forma financial information would be filed by amendment within seventy-one (71) calendar days from the date that the Original Filing was required to be filed. This Form 8-K/A is being filed to amend Item 9.01 of the Original Filing to provide the required financial statements and pro forma financial information described under Item 9.01 below. No other amendments are being made to the Original Filing. This Current Report on Form 8-K/A should be read in conjunction with the Original Form 8-K, which provides a more complete description of the Transaction.

 

1

 

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired.

 

The audited financial statements of Credova as of and for the year ended December 31, 2023 and 2022, and the notes thereto, are filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated herein by reference.

 

(b) Pro Forma Financial Information.

 

The unaudited pro forma condensed combined balance sheet as of December 31, 2023, the unaudited pro forma condensed combining statements of operations for the twelve months ended December 31, 2023 and 2022, and the notes thereto, are filed as Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated herein by reference.

 

(d) Exhibits.

 

Exhibit No.   Description
23.1   Consent of Independent Auditors
99.1   Audited Consolidated Financial Statements of Credova Holdings, Inc. as of and for the years ended December 31, 2023 and 2022
99.2   Unaudited Pro Forma Financial Information as of and for the years ended December 31, 2023 and 2022
104   Cover Page Interactive Data File (embedded within the inline XBRL document)

 

2

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  PSQ Holdings, Inc.
   
Date: May 24, 2024 By: /s/ Michael Seifert
  Name:  Michael Seifert
  Title: Founder, Chairman and Chief Executive Officer

 

 

3

 

Exhibit 23.1

 

 

Consent of Independent Auditors

 

 

We consent to the incorporation by reference in the Registration Statement on Form S-8 of PSQ Holdings, Inc. (No. 333-278074) of our report dated April 22, 2024, relating to the consolidated financial statements of Credova Holdings, Inc. (which report expresses an unmodified opinion and includes an emphasis of matter paragraph relating to the adoption of new accounting standards related to accounting for credit losses), appearing in this Current Report on Form 8-K/A dated March 13, 2024 of PSQ Holdings, Inc.

 

/s/ Moss Adams LLP

 

San Francisco, CA

May 24, 2024

 

 

 

 

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

Report of Independent Auditors and
Consolidated Financial Statements

 

Credova Holdings, Inc.

 

December 31, 2023 and 2022

 

 

 

 

Table of Contents

 

  Page
   
Report of Independent Auditors
   
Consolidated Financial Statements 3
   
Consolidated Balance Sheets 4
   
Consolidated Statements of Operations 5
   
Consolidated Statements of Changes in Stockholders’ Deficit 6
   
Consolidated Statements of Cash Flows 7
   
Notes to Consolidated Financial Statements 9

 

i 

 

 

Report of Independent Auditors

 

The Board of Directors and Stockholders

Credova Holdings, Inc.

 

Report on the Audit of the Financial Statements

 

Opinion

 

We have audited the consolidated financial statements of Credova Holdings, Inc., and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ (deficit) equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

 

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Credova Holdings, Inc. and its subsidiaries as of December 31, 2023 and 2022, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Credova Holdings, Inc. and its subsidiaries and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Change in Accounting Principle

 

As discussed in Note 1 to the consolidated financial statements, Credova Holdings, Inc. changed its method of accounting for credit losses effective January 1, 2023, due to the adoption of Accounting Standards Codification Topic 326: Financial Instruments – Credit Losses (“Topic 326”). Credova Holdings, Inc. adopted the new credit loss standard using the modified retrospective approach such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

 

Responsibilities of Management for the Consolidated Financial Statements

 

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Credova Holdings, Inc. and its subsidiaries’ ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.

 

1

 

 

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

 

In performing an audit in accordance with GAAS, we:

 

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Credova Holdings, Inc. and its subsidiaries’ internal control. Accordingly, no such opinion is expressed.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

 

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Credova Holdings, Inc. and its subsidiaries’ ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.

 

/s/ Moss Adams LLP

 

San Francisco, California

April 22, 2024

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

Credova Holdings, Inc.
Consolidated Balance Sheets

For the Years Ended December 31, 2023 and 2022

 

   For the years ended
December 31,
 
   2023   2022 
         
ASSETS        
Cash  $1,271,999   $807,070 
Restricted cash   190,600    297,265 
Loans receivable, net of allowance for credit losses of $1,268,462 and $2,813,064 as of December 31, 2023 and 2022, respectively   6,746,566    15,062,480 
Vehicles and equipment, net   330,868    464,180 
Capitalized software, net   1,971,461    2,464,346 
Prepaid expenses and other assets   1,273,432    1,754,554 
           
Total assets  $11,784,926   $20,849,895 
           
           
LIABILITIES          
Accounts payable  $2,304,913   $2,609,132 
Accrued liabilities   826,220    855,362 
Revolving loans   5,946,140    14,674,624 
Notes payable   8,569,500    8,354,500 
Term debt   -    122,557 
           
Total liabilities   17,646,773    26,616,175 
           
CONTINGENCIES (Note 8)          
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY          
Preferred stock, $0.00001 par value; 2,473,958 shares authorized as of December 31, 2023 and 2022, respectively; 2,473,958 shares issued and outstanding as of December 31, 2023 and 2022, respectively   25    25 
Common stock, $0.00001 par value; 400,000,000 shares authorized; 197,526,042 shares issued and outstanding as of December 31, 2023 and 2022, respectively   1,975    1,975 
Additional paid in capital   1,981,661    1,981,661 
Accumulated deficit   (7,845,508)   (7,749,941)
           
Total stockholders’ deficit   (5,861,847)   (5,766,280)
           
Total liabilities and stockholders’ deficit  $11,784,926   $20,849,895 

 

See accompanying notes.

 

4

 

 

Credova Holdings, Inc.
Consolidated Statements of Operations

December 31, 2023 and 2022

 

   For the years ended
December 31,
 
   2023   2022 
REVENUES        
Interest income on loans  $6,033,069   $10,118,717 
Gain on loan and lease contracts sold   5,975,344    4,791,756 
Direct revenue   3,459,160    1,132,756 
Lease income   6,607    1,008,405 
           
Total revenues   15,474,180    17,051,634 
           
COST AND EXPENSES          
General and administrative   8,981,005    13,320,730 
Provision for credit losses   2,134,171    4,077,836 
Processing and servicing   1,856,927    2,298,989 
Depreciation of lease merchandise   -    453,706 
           
Total cost and expenses   12,972,103    20,151,261 
           
Total operating income (loss)   2,502,077    (3,099,627)
           
OTHER EXPENSES          
Interest expense   3,035,838    4,463,909 
Other income   (314,502)   (246,427)
           
Total other expenses   2,721,336    4,217,482 
           
LOSS BEFORE INCOME TAX BENEFIT          
    (219,259)   (7,317,109)
           
INCOME TAX BENEFIT   -    (533,000)
           
NET LOSS  $(219,259)  $(6,784,109)

 

See accompanying notes.

 

5

 

 

Credova Holdings, Inc.

Consolidated Statements of Changes in Stockholders’ Deficit

December 31, 2023 and 2022

 

   Preferred Stock   Common Stock   Additional
Paid-in
   Accumulated   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
                             
STOCKHOLDERS’ EQUITY, December 31, 2021   -   $-    200,000,000   $2,000   $1,882,480   $(890,832)  $993,648 
                                    
Exchange of common stock for preferred stock   2,473,958    25    (2,473,958)   (25)   -    -    - 
Dividends paid on preferred stock   -    -    -    -    -    (75,000)   (75,000)
Warrants issued in connection with notes payable   -    -    -    -    99,181    -    99,181 
Net loss   -    -    -    -    -    (6,784,109)   (6,784,109)
                                    
STOCKHOLDERS’ DEFICIT, December 31, 2022   2,473,958    25    197,526,042    1,975    1,981,661    (7,749,941)   (5,766,280)
                                    
Cumulative effect of adoption of ASU 2013-06   -    -    -    -    -    198,692    198,692 
Dividends paid on preferred stock   -    -    -    -    -    (75,000)   (75,000)
Net loss   -               -    -    -    -    (219,259)   (219,259)
                                    
STOCKHOLDERS’ DEFICIT, December 31, 2023   2,473,958   $25    197,526,042   $1,975   $1,981,661   $(7,845,508)  $(5,861,847)

 

See accompanying notes.

 

6

 

 

Credova Holdings, Inc.
Consolidated Statements of Cash Flows
December 31, 2023 and 2022

 

 

   For the years ended
December 31,
 
   2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss  $(219,259)  $(6,784,109)
Adjustments to reconcile net loss to net cash provided by operating activities:          
Provision for credit losses   2,134,171    4,077,836 
Amortization of capitalized software   900,824    1,982,725 
Deferred income taxes   -    (533,000)
Depreciation of lease merchandise   -    453,706 
Depreciation of vehicles and equipment   133,312    108,665 
Amortization of deferred financing costs   66,667    323,027 
Amortization of debt discount   -    684,532 
Amortization of right-of use assets   4,357    4,291 
Origination of loans and leases for resale   (47,191,771)   (33,433,636)
Proceeds from sale of loans and leases for resale   53,167,115    38,225,392 
Gain on sale of loans and leases   (5,975,344)   (4,791,756)
Changes in assets and liabilities:          
Prepaid expenses and other assets   302,745    333,815 
Accounts payable   (304,220)   797,542 
Accrued liabilities   78,212    (145,837)
Income tax payable   -    (180,000)
           
Net cash provided by operating activities   3,096,809    1,123,193 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Disbursements for loans receivable   (13,144,364)   (34,194,185)
Principal paydowns on loans receivable   19,524,799    31,985,573 
Net change in lease merchandise   -    1,787,737 
Purchases of vehicles and equipment   -    (358,078)
Capitalization of software costs   (407,939)   (925,053)
           
Net cash provided by (used in) investing activities   5,972,496    (1,704,006)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Net advances on revolving loans   (8,728,484)   (2,364,154)
Debt issuance costs   -    (121,944)
Payments on term debt   (122,557)   (66,270)
Proceeds from notes payable   900,000    1,050,000 
Repayment of notes payable   (685,000)   - 
Dividends paid on preferred stock   (75,000)   (75,000)
           
Net cash used in financing activities   (8,711,041)   (1,577,368)
           
NET CHANGE IN CASH AND RESTRICTED CASH   358,264    (2,158,181)
           
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD   1,104,335    3,262,516 
           
CASH AND RESTRICTED CASH, END OF PERIOD  $1,462,599   $1,104,335 

 

See accompanying notes.

 

7

 

 

Credova Holdings, Inc.
Consolidated Statements of Cash Flows (Continued)
December 31, 2023 and 2022

 

 

   Years ended December 31, 
   2023   2022 
SUPPLEMENTAL DISCLOSURES        
Cash paid for interest  $3,036,916   $3,832,599 
Income taxes  $-   $180,000 
           
NONCASH INVESTING AND FINANCING ACTIVITIES          
Adoption of ASU 2013-06  $198,692   $- 
Capitalization of right-of-use assets and lease liability  $-   $581,927 
Discount on notes payable from issuance of warrants  $-   $99,181 
Common stock exchanged for preferred stock  $-   $25 

 

The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets to the amount shown in the consolidated statements of cash flows as of December 31: 

 

   2023   2022 
         
Cash  $1,271,999   $807,070 
Restricted cash   190,600    297,265 
Total cash and restricted cash shown on the consolidated statements of cash flows  $1,462,599   $1,104,335 

 

See accompanying notes.

 

8

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Note 1 – Organization and Summary of Significant Accounting Policies

 

Organization – Credova Holdings, Inc. (the “Company”) is a corporation formed for the purpose of facilitating loans and leases to customers of retail stores and merchants as an alternative to traditional financing. The Company, through its subsidiaries, has developed and maintains a point-of-sale financing platform providing buy now, pay later solutions to merchants operating both brick and mortar retail locations, as well as through an integrated API eCommerce solution. Through the platform and integrated API solution, consumers gain access to a network of financing solutions for their purchases, allowing them to select from a variety of financing options during the purchase process. The Company was formed effective November 27, 2018, and is headquartered in Bozeman, Montana. The Company’s activities are performed throughout the United States.

 

Basis of accounting and presentation – The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Credova Holdings, Inc. and its wholly-owned subsidiaries Credova Financial, LLC, Credova SPV I, LLC, Credova SPV II, LLC, Credova Technology, LLC, Fintech Management, Inc., and SLDW Management, Inc. The Company’s intellectual property is held by Credova Technology, LLC. Credova SPV I, LLC and Credova SPV II, LLC subsidiaries manage the Company’s loan and lease portfolio, and Credova Financial, LLC is the Company’s primary operating entity. Fintech Management, Inc. and SLDW Management, Inc. were separate corporate entities controlled by related parties that owned and managed certain intellectual property and other intangible assets. Each corporation became a wholly owned subsidiary of Credova Holdings, Inc. pursuant to merger transactions that occurred in November 2021 and has had no activity during the years ended December 31, 2022 and 2023. All significant intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements.

 

Use of estimates – The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheets, and revenues and expenses for the reporting periods. Actual results could differ significantly from those estimates. Significant estimates and assumptions made by management primarily involve the determination of the allowance for credit losses, the useful life of capitalized software, and deferred tax asset valuation allowance.

 

Cash – The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. In order to minimize risk, at times, the Company utilizes multiple accounts to maintain balances within Federal Deposit Insurance Corporation (“FDIC”) limits and at periods of significant excess cash the Company activates an insured cash sweep account.

 

Restricted cash The Company has two Deposit Account Control Agreements (“DACA”) with lenders. With these agreements, the Company assigned the rights to a collateral account to the lenders. The DACA accounts are utilized to collect the consumer payments on loans and leases. Funds are then distributed in accordance with the Loan Security Agreement. Funds cover payments for servicing, interest on revolving loans, and paying down revolving loans.

 

9

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

The Company does not have access to these collateral accounts, unless separately agreed to in writing by the secured party. The Company is still responsible for any bank fees and charges for the maintenance and administrations of the collateral account. These agreements may be terminated by the lenders at any time, giving the Company thirty days’ prior written notice.

 

Loans receivable, net – Loans are unsecured and are stated at the amount of unpaid principal. Interest on loans is calculated by the simple-interest method on daily balances of the principal amount outstanding. Accrual of interest on loans is discontinued when management believes that, after considering collection efforts and economic and business conditions, the collection of interest is doubtful. The Company’s policy is to stop accruing interest when the loan becomes 120 days’ delinquent.

 

All interest accrued but not collected for loans that are placed on nonaccrual status or subsequently charged-off is reversed against interest income. Income is subsequently recognized on the cash basis until, in management’s judgment, the borrower’s ability to make periodic principal and interest payments returns and future payments are reasonably assured, in which case the loan is returned to accrual status. The Company classifies its loans as either current or past due. Amounts are considered past due if a scheduled payment is not paid on its due date. The Company does not modify the terms of its existing loans with customers.

 

Lease merchandise, net – The Company historically leased consumer goods, consisting primarily of sporting goods, to its customers under certain terms agreed to by the customer. The customer has the right to acquire ownership either through a purchase option or through payment of all required lease payments. Leases typically range between 12 and 30 months. All of the Company’s customer lease agreements are considered operating leases. The consumer goods under operating leases are initially recorded at cost and depreciated on a straight-line basis over the term of the related leases to the consumer goods estimated residual value. All lease assets are purchased concurrent with the execution of a lease commitment by the lessee. Thus, the original depreciation period corresponds with the term of the original lease. Upon transfer of ownership of merchandise to customers, resulting from satisfaction of their lease obligations, the related cost and accumulated depreciation are eliminated from lease merchandise. Amounts shown in the consolidated balance sheets are net of accumulated depreciation.

 

As of December 31, 2023 and 2022, the Company has not retained on balance sheet leases as the Company sells certain lease contracts to third parties and records the undepreciated cost of lease merchandise at the time of the sale within the net gain on lease contracts sold on the consolidated statements of operations. Total depreciation expense as of December 31, 2023 and 2022 related to such activities was $0 and $453,706, respectively. Total provision (benefit) for lease loss as of December 31, 2023 and 2022 related to such activities was $0 and ($153,021), respectively.

 

In addition to selling lease contracts to an unrelated third party, the Company sold lease contracts to two entities controlled by the majority shareholders of the Company. The Company received gross proceeds of $1,753,751 and $11,913,032 and recognized a gain on lease contracts sold of $253,397 and $1,875,930 during the years ended 2023 and 2022, respectively.

 

10

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Allowance for credit losses – The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company identifies its portfolio segments and measures the allowance for credit losses based on similar economic risk characteristics The allowance for credit losses for each portfolio is determined based on our current estimate of expected credit losses over the remaining contractual term, adjusted for expected prepayments when appropriate, and incorporates evaluations of known and inherent risks in our portfolio, historical credit losses, consumer payment trends, estimates of recoveries, current economic conditions, and reasonable and supportable forecasts.

 

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation.

 

Lease arrangements – In the ordinary course of business, the Company enters into a variety of lease arrangements.

 

Transactions give rise to leases when the Company receives substantially all the economic benefits from and has the ability to direct the use of specified property and equipment. The Company determines if an arrangement is a lease at inception. The operating lease right-of-use (“ROU”) assets are included within the Company’s prepaid expenses and other assets and lease liabilities are included in accrued liabilities on the Company’s consolidated balance sheets.

 

ROU assets represent the Company’s right to use, or control the use of, a specified asset for the lease term. Lease liabilities are the Company’s obligation to make lease payments arising from a lease and are measured on a discounted basis. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. The operating lease ROU asset includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

 

Vehicles and equipment, net – Vehicles and equipment purchases are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are from one to five years.

 

Capitalized software, net – The Company capitalizes certain software development costs. Costs incurred in the preliminary stages of development are expensed, but software development costs incurred thereafter, including external direct costs of materials and services as well as payroll and payroll-related costs for employees directly involved in the development of the software, are capitalized. Amortization is computed using the straight-line method over the estimated useful lives of the assets, typically three years. During the year ended December 31, 2023, the Company revised its estimated useful life of its software to three years on a prospective basis, based on the remaining expected useful life of the capitalized costs. The Company will continue to review and adjust useful life as circumstances affect the useful life of the software.

 

Prepaid expenses and other assets – Prepaid expenses and other assets represent expenditures made for future benefits, accrued interest receivable on loans, and ROU asset. Prepaid financing costs were incurred when obtaining financing and are deferred and amortized using the straight-line method over the life of the related financing, which approximates the effective interest method. Interest receivable as of December 31, 2023 and 2022, was $544,887 and $953,002, respectively.

 

11

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Long-lived assets The Company’s long-lived assets, including capitalized software, are reviewed for impairment whenever events or changes in circumstances indicate that the historical carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. During the years ended December 31, 2023 and 2022, the Company evaluated long lived assets for impairment and determined no impairment was necessary.

 

Advertising – The Company expenses advertising costs as incurred and are included in general and administrative expenses in the consolidated statement of operations. Advertising expense was $0 and $540 during the years ended December 31, 2023 and 2022, respectively.

 

Revenue recognition The Company principally generates revenue from four activities: revenue from sale of loan and lease contracts, revenue from leases of consumer goods, revenue from interest earned on loans, and revenue from retailer discounts and origination fees paid by lending institutions (direct revenue) earned in connection with providing financing on consumer goods. Revenue from the Company’s sales of lease contracts is recognized at a point in time when the Company satisfies a performance obligation by transferring control of the leases to the third party. Revenue from leases is recognized over time when the Company satisfies a performance obligation based on the agreed upon financing terms. Interest on loans is calculated by the simple-interest method on daily balances of the principal amount outstanding. Revenue from retailer discounts is recognized at a point in time when the Company satisfies performance obligations by purchasing the contract from the merchant in connection with a merchant originated consumer financing product. Origination fees from lenders are recognized at time of loan origination.

 

The Company has one merchant that accounted for 16% and 15% of loan and lease originations in 2023 and 2022, respectively.

 

Income taxes – The Company accounts for income taxes under the asset and liability method. The provision for federal income tax is based on pre-tax financial statement income or loss. The deferred income tax provision is provided for the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to those differences. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enacted date.

 

The Company recognizes the tax benefit from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company did not have any material uncertain tax positions as of December 31, 2023. Penalties and interest related to any recognized tax benefits would be reported through the income tax provision. Due to the Company’s loss position and net operating loss carryforwards, the tax year 2021 is open to examination by the taxing authorities.

 

12

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Reclassifications – Certain prior year amounts have been reclassified to conform with current year presentation. These changes did not have any effect on net loss or stockholders’ (deficit).

 

Recently issued accounting standards – On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables. It also applies to net investments in leases recognized by a lessor in accordance with Topic 842 on leases.

 

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, while prior amounts continue to be reported in accordance with previously applicable GAAP.

 

The Company finalized the adoption of ASC 326 as of January 1, 2023 as detailed in the following table:

 

   January 1, 2023 
   As Reported   Pre-ASC 326   Impact of ASC 326 
   Under ASC 326   Adoption   Adoption 
Assets:            
Allowance for credit losses  $2,614,372   $2,813,064   $(198,692)

 

Subsequent events – Subsequent events are events or transactions that occur after the consolidated balance sheet date, but before the consolidated financial statements were available to be issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the consolidated balance sheet, including the estimates inherent in the process of preparing the consolidated financial statements. The Company’s consolidated financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the consolidated balance sheet, but arose after the consolidated balance sheet date and before consolidated financial statements are issued.

 

The Company has evaluated subsequent events through April 22, 2024, which is the date the consolidated financial statements were available to be issued. There were no material events or transactions occurring during this subsequent event reporting period, which require recognition or disclosure in the financial statements other than those mentioned in Note 11.

 

13

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Note 2 – Loans Receivable and Allowance for Credit Losses

 

The Company classifies its loans as either current or past due. The following reflects the credit quality of the Company’s loans receivable, as delinquency status has been identified as the primary credit quality indicator, based on the recorded amount of the receivable in delinquent status.

 

The following reflects the credit quality of the Company’s loans receivable as of December 31, 2023.

    

       Past Due     
   Current   30-59 Days   60-89 days   > 90 days   Total 
                     
Loans receivable  $7,777,717   $113,890   $69,207   $54,214   $8,015,028 
                          
Allowance for credit losses                       (1,268,462)
                          
Loans receivable, net                      $6,746,566 

 

The following reflects the credit quality of the Company’s loans receivable as of December 31, 2022.

 

       Past Due     
   Current   30-59 Days   60-89 days   > 90 days   Total 
                     
Loans receivable  $17,455,947   $207,423   $128,173   $84,001   $17,875,544 
                          
Allowance for credit losses                       (2,813,064)
                          
Loans receivable, net                      $15,062,480 

 

These loans have a variety of lending terms as well as original maturities ranging from six weeks to thirty-six months, with the large majority of the Company’s loans having a term of approximately two years. The average remaining life of the Company’s loans was approximately 9 months as of December 31, 2023. Given that the Company’s loan portfolio focuses on unsecured installment loans, the Company evaluates the portfolio as a single homogeneous loan portfolio, and performs further analysis by product type as needed.

 

The Company closely monitors credit quality for its loan receivables to manage and evaluate exposure to credit risk. Credit risk management begins with initial underwriting, where a consumer is assessed based on the Company’s underwriting and credit policy. This includes know your customer identification (“KYC”), traditional credit scoring models, various Fair Credit Reporting Act (“FCRA”) permissible consumer credit and risk data. Credit quality is monitored subsequent to underwriting based on performance metrics that include, but are not limited to, delinquency and default metrics. The Company uses software that monitors credit quality of the respective portfolio and performs analysis on credit data.

 

14

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

The changes in the allowance for credit losses on loans is as follows:

 

Balance at December 31, 2021  $3,415,639   $- 
           
Charge-offs  $(4,833,432)     
Provision for credit losses   4,230,857      
           
Balance at December 31, 2022  $2,813,064   $- 
           
CECL adoption  $(198,692)     
Charge-offs   (3,480,081)     
Provision for credit losses   2,134,171      
           
Balance at December 31, 2023  $1,268,462   $- 

 

Below is a summary of contractual cash flows required on loans receivable as of December 31, 2023.

 

    
Contractual cash flows required on loans receivable  $9,789,151 
Recorded value of loans receivable, net of allowance for credit losses   6,746,566 
      
Excess contractual cash flows over recorded value of loans receivable, net  $3,042,585 

 

The loans receivable disclosed above are collateral under the Company’s revolving loan instruments discussed in Note 5. The fair value of loan receivables approximates the carrying value of the receivable due to the market rates of interest and relatively short-term nature of the receivables.

 

Note 3 – Vehicles and Equipment, Net

 

Vehicles and equipment consisted of the following at December 31:

 

   2023   2022 
         
Vehicles  $327,981   $327,981 
Office equipment   115,532    119,114 
Leasehold improvements   279,481    279,481 
Marketing equipment   808    808 
    723,802    727,384 
           
Less accumulated depreciation   (392,934)   (263,204)
Vehicles and equipment, net  $330,868   $464,180 

 

Depreciation expense on vehicles and equipment for the years ended December 31, 2023 and 2022 was $133,312 and $108,665, respectively, and is included in general and administrative expenses on the consolidated statements of operations.

 

15

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Note 4 – Capitalized Software, Net

 

The Company’s capitalized software consisted of the following as of December 31:

 

   2023   2022 
         
Capitalized software  $9,343,282   $8,935,343 
           
Less accumulated amortization   (7,371,821)   (6,470,997)
Capitalized software, net  $1,971,461   $2,464,346 

 

Amortization expense totaled $900,824 and $1,982,725 for the years ended December 31, 2023 and 2022, respectively, and is included in general and administrative expenses on the consolidated statements of operations.

 

Note 5 – Borrowings

 

Revolving loan – As of December 31, 2023, the Company has a $10,000,000 revolving loan with a finance company which bears interest at a rate of 15% and requires minimum monthly interest payments. The funding termination date is June 30, 2024. All assets of Credova SPV I, LLC are assigned as collateral. The total amount that can be borrowed under the loan is reduced to the amount of the borrowing base if that amount is lower. The borrowing base is based upon a percentage of eligible receivables which are valued as the outstanding principal amount, less adjustments for receivables 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. As of December 31, 2023 and 2022, the outstanding advances under this revolving loan totaled $5,946,140 and $14,674,624, respectively.

 

Notes payable – In July 2019, the Company accepted assignment of various promissory notes payable to individuals from the members in lieu of payment for loans receivable acquired by the Company, with outstanding balances as of 2023 and 2022 totaling $3,830,000. The notes bear simple interest at a rate of 15% annually, and stipulate monthly interest payments with principal due upon maturity. All notes were originally due October 2020. They were extended to expire in October 2023, and were extended for an additional 12 to 36 months. In the event of liquidation of the Company, in addition to the outstanding notes payable being repaid, all notes include a clause which allows the holders of the notes to purchase units of membership interest of the Company equal to $0.50 per unit up to the amount of the promissory note. The fair value of warrant agreements was immaterial. As such, the entirety of the proceeds from issuance has been allocated to debt. The Company recognized $574,500 and $578,250 of interest expense related to these notes payable during the years ended December 31, 2023 and 2022, respectively.

 

16

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

During the year ended December 31, 2022, the Company received $4,024,500 of cash proceeds through issuance of unsecured notes payable to multiple investors. The notes originally were due to mature 12 months from issuance and bear interest at 15%. Through December 31, 2022, the investors received a total of 4,024,500 warrants to purchase common stock of Credova Holdings, Inc. at an exercise price of $0.75 per share which will expire upon the earlier of two years from issuance or the sale of the Company. The warrants were estimated to have a fair value of $0.22 per share based on a third-party valuation of the Company using a discounted cash flow and comparable public company analysis, including an estimated weighted average cost of capital of 24%, and Black Scholes option pricing models which utilized estimated volatility of 36%, time to maturity of 2 years and a risk-free interest rate of 0.7%. The valuation resulted in an estimate common share value of $0.82 per share.

 

In December 2022, the Company refinanced all notes disclosed above. The maturity date was extended and all other terms remained unchanged. The notes were extended between 6 and 36 months, with the majority extended 36 months until December 2025 at earliest. In addition, the Company entered into amendments to extend $3,875,000 of notes payable that were due in 2023 for an additional 36 months until December 2025 at earliest.

 

During 2023, the Company repaid $685,000 of December 2021 notes payable and cancelled 685,000 in respective warrants. The Company recognized $520,300 and $601,893, respectively, of interest expense related to these notes payable during the years ended December 31, 2023 and 2022.

 

The aggregate relative fair value of the warrants issued during the years ended December 31, 2023 and 2022 of $0 and $99,180, respectively, was recognized as a debt discount on the notes payable and is being amortized through the maturity date of the notes. The Company amortized $0 and $684,532 to interest expense during the years ended December 31, 2023 and 2022, respectively, and there was no unamortized discount remaining of as of December 31, 2023 and 2022, respectively.

 

During 2023 and 2022, the Company entered into term loans with a related party for a principal amount of $200,000 and $500,000, respectively. The loans bears interest at 15% and mature between 12 and 36 months. Payments are interest only with principal due at maturity. The total principal balance due to the related party was $700,000 and $500,000 as of December 31, 2023 and 2022, respectively.

 

During 2023, the Company entered into new term loans with total principal of $700,000. These loans bear interest at 15% and mature between 12 and 24 months. Payments are interest only and principal due at maturity.

 

On September 30, 2021, the Company entered into a business loan agreement with a bank, for principal of $204,987. The loan bears interest at 3.95%, matures on September 30, 2024, is secured by the two pickup trucks described above and one additional pickup truck and requires monthly payments of $6,052. The proceeds of this loan were used to retire in full the truck notes payable described above at closing. In December 2023, the Company satisfied the remaining note balance.

 

17

 

  

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Scheduled maturities of the Company’s borrowings are as follows:

 

Years ending December 31,    
     
2024  $6,846,140 
2025   3,239,500 
2026   4,430,000 
      
   $14,515,640 

 

Note 6 – Income Taxes

 

The federal and state income tax provision (benefit) is summarized as follows for the years ended December 31:

 

   2023   2022 
Current:        
Federal  $      -   $- 
State and other   -    - 
           
Total current income taxes   -    - 
           
Deferred:          
Federal   -    (431,635)
State and other   -    (101,365)
           
Total deferred income taxes   -    (533,000)
           
Income tax (benefit) provision  $-   $(533,000)

 

18

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

The tax effects of significant items comprising the Company’s deferred taxes as of December 31 are as follows:

 

   2023   2022 
Deferred tax assets:        
Start-up costs  $3,518   $4,113 
Loan loss reserves   299,059    664,601 
Net operating loss   1,047,511    873,419 
Property and equipment   6,096    - 
Lease liability   95,753    121,315 
Capitalized software   40,714      
Other   4,202    4,200 
           
Total deferred tax assets   1,496,853    1,667,648 
           
Deferred tax liabilities:          
Property and equipment   -    (13,764)
Capitalized software   -    (145,210)
ROU asset   (93,715)   (120,302)
           
Total deferred tax liabilities   (93,715)   (279,276)
           
Valuation allowance   (1,403,138)   (1,388,372)
           
Net deferred taxes  $-   $- 

 

ASC 740, Income Taxes, requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by $14,766 during 2023 and increased by $949,345 during 2022.

 

As of December 31, 2023, the Company has federal net operating losses of approximately $4.2 million which do not expire, and various state net operating losses with various expiration dates.

 

Current tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an ownership change, as defined by the Internal Revenue Code. Such an event may limit the Company’s ability to utilize its net operating losses.

 

19

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows:

 

   2023   2022 
         
Statutory federal income tax rate   21.00%   21.00%
State income taxes, net of federal benefit   -1.39%   3.20%
Permanent items   -18.17%   -2.11%
Other   5.29%   4.16%
Valuation allowance   -6.73%   -18.97%
           
Effective income tax rate   0.00%   7.28%

 

The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows for the years ending December 31:

 

   2023   2022 
         
Statutory rate  $(46,044)  $(1,536,593)
State tax   3,047    (234,285)
Permanent items   39,843    154,030 
Other   (11,612)   (304,524)
Valuation allowance   14,766    1,388,372 
           
Total  $-   $(533,000)

 

U.S. GAAP prescribes a recognition threshold and measurement process in accounting for uncertain tax positions and provides guidance on various related matters such as derecognition, interest, penalties, and disclosures required. The Company does not have any entity-level uncertain tax positions.

 

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to the unrecognized tax benefits noted above, there were no accrued penalties or interest as of December 31, 2023, nor were any penalties or interest expense recognized for the period.

 

The Company files tax returns in the U.S. Federal and various state jurisdictions. The Company is subject to examination for the year ending December 31, 2019 and later.

 

20

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Note 7 – Capital Stock

 

Preferred Stock – In December 2022, the Company amended its articles of incorporation to allow for the issuance of up to 2,473,958 shares of Series AA Convertible Preferred Stock (the “Series AA Convertible Preferred Stock”). The Series AA Convertible Preferred Stock is nonvoting, bears cumulative dividends of 3.0316% per annum on the sum of the liquidation value of the Series AA Convertible Preferred Stock, which is $1 per shares of preferred stock. The Series AA Convertible Preferred Stock is convertible by the holder into shares of common stock at a conversion price of $1 per share. In the event of a change of control or a qualified public offering of the Company’s common stock on a national securities exchange with proceeds of at least $25,000,000, the Series AA Convertible Preferred Stock will automatically convert to common stock immediately prior to such transaction at $1 per share.

 

In December 2022, the Company entered into an exchange agreement with a common stockholder. The common stockholder exchanged 2,473,958 shares of common stock for 2,473,958 shares of Series AA Convertible Preferred Stock.

 

Common Stock – The Company is authorized to issue 400,000,000 shares of common stock with a par value of $0.00001 per common share.

 

Common Stock Warrants – In connection with the issuance of notes payable in December 2021 and January 2022 for cash proceeds, the Company issued a total of 4,024,500 warrants, respectively, to purchase common stock of the Company at an exercise price of $0.75 per share. The warrants terminate on the earlier to occur of two years from the date of issuance of the notes or the sale of the Company. All warrants related to these notes payable expired in December 2023, without being exercised.

 

The assignment of various promissory notes payable in July 2019 to the Company included a clause to allow the holders of the notes to purchase common stock of the Company at an exercise of $0.50. Total warrants outstanding on these notes is 7,660,000 as of December 31, 2023 and 2022. The holder of the notes is able to exercise the warrants upon the occurrence of a liquidation event, merger, consolidation, or an initial public offering of the Company and the warrants remain outstanding as long as the related note is outstanding. As of December 31, 2023, there were 1,310,000 of these warrants outstanding.

 

The following table summarizes the stock warrant activity for the year ended December 31, 2023:

 

    Warrants   Weighted
Average
Exercise Price per Share
 
          
Outstanding, December 31, 2022    11,684,500   $0.59 
Granted    -    - 
Exercised    -    - 
Forfeited/cancelled    -    - 
Expired    (10,374,500)   0.60 
            
Outstanding, December 31, 2023    1,310,000   $0.50 

 

As of December 31, 2023, the outstanding and exercisable warrants have a weighted average remaining term of 0.83 years and have an estimated aggregate intrinsic value of $419,200.

 

21

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

Note 8 – Contingencies

 

Litigation – From time to time, the Company finds itself, in the normal course of business, named in various lawsuits and the Company intends to vigorously defend such claims. The ultimate liability, if any, for the aggregate amounts claimed against the Company cannot be determined at this time. However, the Company’s management, based on consultation with legal counsel, is of the opinion that there are no matters pending or threatened where it is reasonably possible that a material loss would be incurred by the Company.

 

Note 9 – Leases

 

In December 2021, the Company entered into a lease agreement for its corporate office location which had a commencement date of May 2022 and contains annual rent increases through April 2027. There is no purchase option or transfer of title of the leased premises at the end of the lease. The Company is responsible for all expenses, maintenance and taxes on the leased premises during the lease term. The Company has the option to renew the lease for an additional five-year period at prevailing rental rates at that time. At commencement of the lease, the Company estimated the initial value of the ROU asset and lease liability to be $581,927, based on the present value of the lease payments and a risk-free interest rate of 3.01%, based on the U.S. Treasury rate for a 5-year instrument, as allowed under FASB ASC 842. The Company did not consider the renewal option to be reasonably certain of exercise at the commencement of the lease therefore is not included in the ROU asset or liability.

 

As of December 31, 2023, the lease was considered an operating lease and included in the consolidated balance sheet as follows:

 

   December 31,
2023
   December 31,
2022
 
           
ROU asset, included in prepaid expenses and other assets  $397,491   $509,202 
Lease liability included in accrued liabilities  $406,139   $513,493 

 

During the year ended December 31, 2023 and 2022, the Company had cash flows used in operating activities of $107,354 and $68,433 respectively, related to operating lease liabilities.

 

22

 

 

Credova Holdings, Inc.
Notes to Consolidated Financial Statements

 

 

At December 31, 2023, the future minimum commitments under the noncancelable operating lease is as follows:

 

Year ending December 31,    
2024  $124,538 
2025   127,817 
2026   131,194 
2027   44,111 
      
Total lease payments   427,660 
      
Less imputed interest   21,521 
      
Total lease liability  $406,139 

 

Note 10 – 401(k) Profit-sharing Plan

 

The Company sponsors a 401(k) profit-sharing plan that covers all employees that have completed two months of service. Employer contributions to the plan are discretionary, and the Company made contributions to the plan of $89,663 and $100,879 for the years ended December 31, 2023 and 2022, respectively. Employees vest in their portion of the employer contributions 20% after two years of service and 20% every year thereafter, such that employees are 100% vested after six years of service.

 

Note 11 – Subsequent Events

 

On March 12, 2024, the Company redeemed 100% of the Preferred Stock issued and outstanding for $500,000.

 

On March 13, 2024, PSQ Holdings, Inc. (“PublicSquare”) issued 2.9 million shares of its newly-issued Class A common stock for all of the outstanding shares of the Company (“the Merger”). Additionally, all of the Company’s outstanding subordinated debt was canceled and either repaid or exchanged for newly-issued 10-year PublicSquare promissory notes, convertible into PublicSquare Class A common stock. Following the Merger, Credova is a wholly-owned subsidiary of PublicSquare.

 

23

Exhibit 99.2

 

PSQ HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

On March 13, 2024 (the “Closing Date”), PSQ Holdings Inc. (the “Company”, “PSQ”, “we” or “us”) entered into an agreement and plan of merger (the “Credova Merger Agreement”) with Cello Merger Sub, Inc., a Delaware corporation and 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 (the “Credova Merger”).

 

Pursuant to the Credova Merger Agreement, on March 13, 2024, the transactions which are the subject of the Credova Merger Agreement were consummated and Merger Sub merged with and into Credova (the “Credova Merger”), with Credova surviving as a wholly-owned subsidiary of PSQ. In connection with the Credova Merger, each share of Credova’s equity was converted into the right to receive newly-issued shares of PSQ Class A common stock (“Class A Common Stock”) and was delivered to the Credova stockholders at the closing (“Credova Stockholders”).

 

As consideration for the Credova Merger, Credova stockholders received 2,920,993 newly-issued shares of Class A Common Stock (the “Consideration Shares”). See Note 1 to this unaudited pro forma condensed combined financial information for additional information on the Merger.

 

The unaudited pro forma condensed combined financial information is presented to illustrate the effects of the acquisition of Credova by the Company and the issuance of debt used to fund the Credova Merger, as if the Credova Merger had occurred on January 1, 2023, the beginning of the most recently completed fiscal year preceding the Credova Merger. The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of Regulation S-X, as amended by Securities and Exchange Commission (the “SEC”) Final Rule Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses and are presented to illustrate the estimated effects of the Credova Merger and the issuance of debt used to fund the Credova Merger.

 

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2023 are based upon, derived from and should be read in conjunction with PSQ’s historical audited consolidated financial statements for the year ended December 31, 2023 (which are available in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 14, 2024), and the audited historical financial statements of Credova included in this Form 8-K/A as Exhibit 99.1.

 

 

 

 

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 assumes that the Credova Merger occurred on January 1, 2023, the beginning of the earliest period presented. The unaudited pro forma condensed combined balance sheet as of December 31, 2023 assumes that the Credova Merger occurred on December 31, 2023. The historical combined financial information has been adjusted to give pro forma effect to reflect the accounting for the Credova Merger in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made. The assumptions underlying the pro forma adjustments are described fully in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.

 

The Credova Merger is being accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations” (“ASC 805”). Under ASC 805, all assets acquired and liabilities assumed are recorded at their acquisition date fair value. The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information is based upon management’s internally developed preliminary estimates of the fair market value of the assets acquired and liabilities assumed, as if the Credova Merger had occurred on the aforementioned dates. This allocation of the purchase price depends upon certain estimates and assumptions, all of which are preliminary and, in some instances, are incomplete and have been made solely for the purpose of developing the unaudited pro forma condensed combined financial information. Any adjustments to the preliminary estimated fair value amounts could have a significant impact on the unaudited pro forma condensed combined financial information contained herein, and our future results of operations and financial position.

 

The unaudited pro forma condensed combined financial information is not necessarily indicative of the combined financial position or results of operations that would have been realized had the Credova Merger occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the Company will experience after the Credova Merger.

 

2

 

 

PSQ HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2023

 

    PSQ
December 31,
2023
(1)
    Credova
December 31,
2023
(2)
    Transaction
Accounting
Adjustments
(Note 3)
    Note Ref   Pro Forma
Combined
 
Assets                            
Current assets                            
Cash and cash equivalents   $ 16,446,030     $ 1,271,999     $ (1,587,184 )   3A   $ 16,130,845  
Restricted cash     -       190,600       -           190,600  
Accounts receivable, net     204,879       109,260       -           314,139  
Loans held for investment, net of allowance for credit losses of $1,052,111 as of December 31, 2023     -       5,599,650       902,222     3D     6,501,872  
Interest receivable     -       544,887       -           544,887  
Inventory     1,439,182       -       -           1,439,182  
Prepaid expenses and other current assets     3,084,576       221,794       -           3,306,370  
Total current assets     21,174,667       7,938,190       (684,962 )         28,427,895  
Loans held for investment, net of allowance for credit losses of $216,351 as of December 31, 2023, non current     -       1,146,916       -           1,146,916  
Property and equipment, net     127,139       330,868       -           458,007  
Intangible assets, net     3,557,029       1,971,461       9,748,539     3B     15,277,029  
Goodwill     -       -       10,807,228     3E     10,807,228  
Operating lease right-of-use assets     324,238       397,491       (56,370 )   3C     665,359  
Deposits     63,546       -       -           63,546  
Total assets   $ 25,246,619     $ 11,784,926     $ 19,814,435         $ 56,845,980  
                                     
Liabilities and stockholders’ equity (deficit)                                    
Current liabilities                                    
Revolving line of credit   $ -     $ 5,946,140       -         $ 5,946,140  
Accounts payable     1,828,508       2,304,913       -           4,133,421  
Accrued expenses     1,641,553       420,081       1,406,185     3F     3,467,819  
Deferred revenue     225,148       -       -           225,148  
Operating lease liabilities, current portion     310,911       96,304       -           407,215  
Total current liabilities     4,006,120       8,767,438       1,406,185           14,179,743  
Convertible promissory notes     -       8,569,500       (120,000 )   3G     8,449,500  
Warrant liabilities     10,130,000       -       -           10,130,000  
Earn-out liabilities     660,000       -       -           660,000  
Operating lease liabilities     16,457       309,835       (65,018 )   3C     261,274  
Total liabilities     14,812,577       17,646,773       1,221,167           33,680,517  
Commitments and contingencies                                    
Stockholders’ equity (deficit)                                  
Preferred stock, $0.00001 par value; 2,473,958 shares authorized, issued and outstanding as of December 31, 2023     -       25       (25 )   3H     -  
Common stock, $0.00001 par value; 400,000,000 shares
authorized; 197,526,042 shares issued and outstanding as of December 31, 2023
    -       1,975       (1,975 )   3H     -  
Class A Common stock, $0.0001 par value; 500,000,000 authorized shares; 24,410,075 shares issued and outstanding as of December 31, 2023     2,441       -       310     3F     2,751  
Class C Common stock, $0.0001 par value; 40,000,000 authorized shares; 3,213,678 shares issued and outstanding as of December 31, 2023     321       -       -           321  
Additional paid in capital     72,644,419       1,981,661       12,155,653     3H     87,669,124  
                      887,391     3F        
Accumulated deficit     (62,213,139 )     (7,845,508 )     7,845,508     3H     (64,506,733 )
                      (2,293,594 )   3F        
Total stockholders’ equity (deficit)     10,434,042       (5,861,847 )     18,593,268           23,165,463  
Total liabilities and stockholders’ equity (deficit)   $ 25,246,619     $ 11,784,926     $ 19,814,435         $ 56,845,980  

 

(1) Derived from PSQ’s historical audited consolidated financial statements for the year ended December 31, 2023 (which are available in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 14, 2024)
   
(2)

Derived from the audited historical financial statements of Credova included in this Form 8-K/A as Exhibit 99.1

 

Refer to accompanying notes

 

3

 

 

PSQ HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2023

 

   PSQ
December 31,
2023
(1)
   Credova
December 31,
2023
(2)
   Transaction
Accounting
Adjustments
(Note 4)
   Note Ref  Pro Forma
Combined
 
Revenues, net  $5,685,987   $15,474,180   $-      $21,160,167 
Costs and expenses:                       
Cost of revenue (exclusive of depreciation and amortization shown separately below)   1,829,066    1,856,927    -       3,685,993 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)   1,969,147    -    -       1,969,147 
General and administrative   15,222,451    10,081,040    2,293,594   4A   28,499,307 
              902,222   4B     
Sales and marketing   12,096,211    -    -      12,096,211 
Transaction costs incurred in connection with the Business Combination (Colombier Acquisition Corp.)   6,845,777    -    -       6,845,777 
Research and development   4,626,625    -    -       4,626,625 
Depreciation and amortization   2,442,706    1,034,136    1,819,176   4C   5,296,018 
Total costs and expenses   45,031,983    12,972,103    5,014,992       63,019,078 
Operating (loss) income   (39,345,996)   2,502,077    (5,014,992)      (41,858,911)
Other income (expense):                       
Other income, net   340,807    314,502    -       655,309 
Change in fair value of convertible promissory notes   (14,571,109)   -    -       (14,571,109)
Change in fair value of earn-out liabilities   1,740,000    -    -       1,740,000 
Change in fair value of warrant liabilities   (1,313,500)   -    -       (1,313,500)
Interest expense, net   (177,444)   (3,035,838)   410,081   4D   (2,803,201)
Loss before income tax benefit (expense)   (53,327,242)   (219,259)   (4,604,911)      (58,151,412)
Income tax expense   1,945    -    -   4E   1,945 
Net loss  $(53,329,187)  $(219,259)  $(4,604,911)     $(58,153,357)
                        
Net loss per common share, basic and diluted  $(2.43)  $-   $-      $(2.32)
Weighted-average shares outstanding, basic and diluted   21,964,451    -    3,104,342   4F   25,068,793 

 

(1)

Derived from PSQ’s historical audited consolidated financial statements for the year ended December 31, 2023 (which are available in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 14, 2024)

 

(2)

Derived from the audited historical financial statements of Credova included in this Form 8-K/A as Exhibit 99.1

 

Refer to accompanying notes

 

4

 

 

PSQ HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 1 – Description of Transaction

 

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 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 (the “Credova Merger”).

 

Pursuant to the Credova Merger Agreement, on March 13, 2024, the transactions which are the subject of the Credova Merger Agreement were consummated and Merger Sub merged with and into Credova (the “Credova Merger”), with Credova surviving as a wholly-owned subsidiary of PSQ. In connection with the Credova Merger, each share of Credova’s equity was converted into the right to receive newly-issued shares of PSQ Class A common stock (“Class A Common Stock”), and was delivered to the Credova stockholders at the closing (“Credova Stockholders”).

 

Credova assists consumers, lenders, and retailers in offering point-of-sale financing products. Credova has developed and maintains an internet-based proprietary retail finance platform and related application programming interfaces (“APIs”) through which Credova, certain Federal Deposit Insurance Corporation (“FDIC”) and National Credit Union Administration (“NCUA”) insured financial institutions, other financial institutions authorized by Credova (each a “Financing Partner”), and merchants can dynamically offer certain financing products.

 

Credova’s offerings fall into four main categories: (i) Merchant-originated products; (ii) Bank Partner-originated closed-end installment loans; (iii) Credova-originated loan products; and (iv) Zero-interest installment product (“Pay-in-4”).

 

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 ten-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.

 

5

 

 

PSQ HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 2 – Basis of Presentation

 

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K (“the 2023 Form 10-K”) for the year ended December 31, 2023, and the audited historical financial statements of Credova for the year ended December 31, 2023, and has been prepared as if the Credova Merger had occurred on January 1, 2023.

 

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 combines the consolidated balance sheet included in the 2023 Form 10-K with the historical audited balance sheet for Credova as of December 31, 2023, and has been prepared as if the Credova Merger had occurred on December 31, 2023. The unaudited pro forma combined financial information herein has been prepared to illustrate the effects of the Credova Merger in accordance with U.S. GAAP and pursuant to Article 11 of Regulation S-X. 

 

The Credova audited historical consolidated financial statements as of and for the year ended December 31, 2023 are included in this Current Report on Form 8-K/A. These unaudited pro forma condensed combined statements should be read in conjunction with such historical financial statements. The historical consolidated financial information has been adjusted to give pro forma effect to reflect the accounting for the Credova Merger in accordance with U.S. GAAP. The historical Credova financial statements as of and for the year ended December 31, 2023 have been adjusted to reflect certain reclassifications to conform to the Company’s financial statement presentation in the unaudited pro forma condensed combined financial statements.

 

The Company has accounted for the Credova Merger under the acquisition method of accounting in accordance with the authoritative guidance on business combinations under the provisions of ASC 805. The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information was based on a preliminary valuation of the assets acquired and liabilities assumed, and the accounting is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available. The final purchase price allocation may include changes to the amount of intangible assets, goodwill, and deferred taxes, as well as other items. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates and the final purchase accounting may occur, and these differences could be material.

 

Assets acquired and liabilities assumed in a business combination that arise from contingencies must be recognized at fair value if the fair value can be reasonably estimated. If the fair value of an asset or liability that arises from a contingency cannot be determined, the asset or liability would be recognized in accordance with ASC 450, “Disclosure of Certain Loss Contingencies” (“ASC 450”). If the fair value is not determinable and the ASC 450 criteria are not met, no asset or liability would be recognized. Management is not aware of any material contingencies related to Credova.

 

The unaudited pro forma condensed combined financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods presented, nor is it necessarily indicative of the future results of the combined company. The unaudited pro forma combined financial information does not reflect any cost savings from future operating synergies or integration activities, if any, or any revenue, tax, or other synergies, if any, that could result from the Credova Merger.

 

6

 

 

PSQ HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 3 – Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments Related to the Credova Merger

 

The allocation of the purchase price discussed below is preliminary. The final allocation of the purchase price will be determined at a later date and is dependent on a number of factors, including the final evaluation of the fair value of Credova’s tangible and identifiable intangible assets acquired and liabilities assumed. Such final adjustments, which may include other increases or decreases to amortization resulting from the allocation of the purchase price to amortizable tangible and intangible assets, along with the related income tax effect, may be material.

 

The total consideration transferred as if the acquisition date was December 31, 2023 is presented as follows:

 

Purchase consideration:    
2,920,993 shares of PSQ Class A Common Stock, at fair value  $14,137,606 
Assumption of notes payable   8,449,500 
Cash paid   1,587,184 
Total purchase consideration  $24,174,290 

 

The total preliminary estimated purchase consideration as shown in the table above is allocated to the tangible and intangible assets and liabilities of Credova based on their estimated fair values, with any excess purchase consideration allocated to goodwill as follows.

 

      Amounts as of December 31, 2023 
Purchase Consideration  Note  Preliminary Credova Balance   Purchase Price Adjustment   Adjusted Balance 
Cash and Restricted Cash     $1,462,599   $-   $1,462,599 
Loans held for investment – current and non-current  D   6,746,566    902,222    7,648,788 
Fixed assets      330,868    -    330,868 
Intangible assets  B   1,971,461    9,748,539    11,720,000 
Prepaid expenses and other current assets      875,941    -    875,941 
Goodwill  E   -    10,807,228    10,807,228 
Operating lease right of use asset  C   397,491    (56,370)   341,121 
Accounts payable and other current liabilities      (2,724,994)   -    (2,724,994)
Lease liability, current and non-current  C   (406,139)   65,018    (341,121)
Revolving line of credit      (5,946,140)   -    (5,946,140)
Fair value of assets acquired      2,707,653   $21,466,637   $24,174,290 

 

  A.

This adjustment results in a decrease to cash and cash equivalents of $1.6 million for the cash consideration paid on the Closing Date.

 

  B. Represents the adjustments to eliminate historical Credova’s intangibles and to record the preliminary estimated fair value of intangible assets identified upon the acquisition. Of the total consideration, approximately $11.7 million relates to identified intangible assets. The fair value estimate for identifiable intangible assets is preliminary and is determined based on the assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). The final fair value determination for identified intangibles may differ from this preliminary determination.

 

7

 

 

PSQ HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

 

The fair value of identifiable intangible assets was determined using the “income approach”, which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of the identifiable intangible assets valuations, from the perspective of a market participant, include the estimated after-tax cash flows that will be received for the intangible asset, the appropriate discount rate selected in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, and competitive trends impacting the asset and each cash flow stream. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change or the timely completion of each project to commercial success will occur. For these and other reasons, actual results may vary significantly from estimated results. The methodologies and significant assumptions utilized to value the intangible assets include using a discount rate that reflected the risks inherent in the cash flow stream as well as the nature of the asset.

 

The following table summarizes the estimated fair values of Credova identifiable intangible assets and their estimated useful lives:

 

   Fair value   Useful life
Trademarks and Tradenames  $1,700,000   5
Internally developed software   3,600,000   3
Merchant relationships   5,900,000   5
State operating licenses   520,000   Indefinite
Total intangible assets  $11,720,000    

 

  C. Represents an adjustment to account for acquired leases as new leases under purchase accounting pursuant to ASC 805 and ASC 842.

 

  D. Represents an adjustment to increase the carrying value of the loans held for investment to its preliminary estimated fair value on date of acquisition. This adjustment results in an increase to the loans held for investment of $0.9 million.

 

  E. As a result of the Credova Merger, goodwill is calculated as the difference between the fair value of the consideration transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. This adjustment of $10.8 million represents the adjustment to increase goodwill per the purchase price allocation.

 

  F. Represents an adjustment to reflect the accrual of transaction costs incurred by PSQ associated with the Credova Merger, and results in a $2.3 million increase to accrued expenses of $1.4 million and an increase in additional paid in capital for $0.9 million, representing shares issued to a consulting company.

 

G.Reflects the adjustment for the promissory note exchange described above in Note 1 under the caption Promissory Note Exchange.

 

  H. Adjustment eliminates Credova historical shareholders’ equity and to record the additional paid-in capital for the issuance of the Company’s Class A Common Stock of $14.1 million, as part of purchase price consideration. Additionally adjusted for the shares issued to a consulting company for services provided, resulting in an adjustment of $0.9 million to additional paid in capital.

 

8

 

 

PSQ HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 4 – Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments Related to the Credova Merger for the year ended December 31, 2023

 

  A. Reflects an adjustment to reflect $2.3 million of transaction costs incurred by PSQ that are not included in the historical financial statements of PSQ and Credova, resulting in a $1.4 million increase professional fees incurred, and a $0.9 million increase of share-based compensation expenses, grouped in general and administrative expenses.

 

B.Reflects the amortization of $0.9 million related to the fair value adjustment of loans held for investment.

 

C.Reflects the removal of the historical Credova amortization of $0.9 million and the addition of recorded pro forma amortization expense of $2.7 million on the portion of the purchase price allocated to definite-lived intangible assets as follows:

 

   Carrying
Value
   Weighted
Average
Amortization
(in Years)
  Amortization
Expense
 
Trade Names and Trademarks  $1,700,000   5  $340,000 
Internally-Developed Software   3,600,000   3   1,200,000 
Merchant Relationships   5,900,000   5   1,180,000 
Total  $11,200,000      $2,720,000 
Less: Credova Historical Amortization for the year ended December 31, 2023          $900,824 
Pro Forma adjustment to amortization          $1,819,176 

 

  D. As stated above, the Company executed a note exchange 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 ten-year maturity dates. This adjustment represents the removal of the historical interest expense relating to the Subdebt Notes of $1.2 million and the addition of recorded pro forma interest expense based on the 9.75% simple interest per annum of $0.9 million.

 

  E. No income tax adjustment is reflected for the year ended December 31, 2023 based on PSQ having a full valuation allowance on its net deferred tax asset.

 

  F. Reflects the additional shares issued whereby PSQ issued Class A common stock worth $14.1 million (2,920,993 shares at $4.84 per share) to the Sellers in connection with the acquisition of Credova as well as Class A Common stock worth $0.9 million (183,349 shares per $4.84 per share) to a consultant in connection with the Credova Merger.

 

 

9

 

 

v3.24.1.1.u2
Cover
Mar. 13, 2024
Document Type 8-K/A
Amendment Flag true
Amendment Description PSQ Holdings, Inc. (the “Company” or “we” or “us”) filed a Current Report on Form 8-K, with the Securities and Exchange Commission on March 14, 2024 (the “Original Filing”) to report the completion of its merger with Credova Holdings, Inc. (“Credova”), pursuant to the agreement and plan of merger dated March 13, 2024 (the “Credova Merger Agreement”), by and between Cello Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, Credova, and Samuel L. Paul, in the capacity as the seller representative, in accordance with the terms of the Credova Merger Agreement (the “Transaction”). In the Original Filing, we stated that required financial statements and pro forma financial information would be filed by amendment within seventy-one (71) calendar days from the date that the Original Filing was required to be filed. This Form 8-K/A is being filed to amend Item 9.01 of the Original Filing to provide the required financial statements and pro forma financial information described under Item 9.01 below. No other amendments are being made to the Original Filing. This Current Report on Form 8-K/A should be read in conjunction with the Original Form 8-K, which provides a more complete description of the Transaction.
Document Period End Date Mar. 13, 2024
Entity File Number 001-40457
Entity Registrant Name PSQ Holdings, Inc.
Entity Central Index Key 0001847064
Entity Tax Identification Number 86-2062844
Entity Incorporation, State or Country Code DE
Entity Address, Address Line One 250 S. Australian Avenue
Entity Address, Address Line Two Suite 1300
Entity Address, City or Town West Palm Beach
Entity Address, State or Province FL
Entity Address, Postal Zip Code 33401
City Area Code 877
Local Phone Number 776-2402
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company true
Elected Not To Use the Extended Transition Period false
Class A common stock, par value $0.0001 per share  
Title of 12(b) Security Class A common stock, par value $0.0001 per share
Trading Symbol PSQH
Security Exchange Name NYSE
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share  
Title of 12(b) Security Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share
Trading Symbol PSQH.WS
Security Exchange Name NYSE

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