# PSQ Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [PSQ Holdings, Inc.](/companies/psqh.md) (CIK 1847064)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 21:32 ET
- Period: 2024-09-30
- Accession: 0001628280-24-047209
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1847064/000162828024047209/psqh-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1847064/000162828024047209/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $6.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $16.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $1.8m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $4.6m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $4.2m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $9.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $973.5k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $3.1m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$14.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$43.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $756.8k | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $1.4m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | −$12.4k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $1.2k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$13.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$36.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.41 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.21 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.41 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.21 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 31,758,032 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 30,526,102 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$27.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $4.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $16.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $44.2m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $8.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $39.8m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $4.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 67,403 characters.

*The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes hereto included in Part I, Item 1 of this quarterly report on Form 10-Q and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2024. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and those discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC.*

*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.*

### Cautionary Note Regarding Forward-Looking Statements

This report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, the future financial performance of the company, our growth plans and opportunities, our financial performance, our ability to raise additional funds, and any other statements that are not statements of current or historical facts.

The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2023, which are incorporated by reference herein. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law. These risks and others described under “Risk Factors” may not be exhaustive.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.

### Overview

PSQ Holdings, Inc. (collectively “PublicSquare”, “PSQ”, “PSQH” or the “Company”) is a commerce and payments ecosystem, valuing life, family, and liberty. PublicSquare operates under three segments: Marketplace, Financial Technology, and Brands (“Marketplace”, “Financial Technology”, and “Brands”). The primary mission of the Marketplace segment is to help consumers “shop their values” and put purpose behind their purchases. PublicSquare leverages data and insights from the Marketplace to assess its customers’ needs and provide wholly-owned quality financial products and brands. PublicSquare’s Financial Technology segment comprises Credova, a consumer financing and payments company. PublicSquare’s Brands segment comprises EveryLife, a premium direct-to-consumer (“D2C”) life-affirming baby products company and PSQLink, LLC ("PSQLink"), a digital marketing and customer relationship management ("CRM") platform.

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 PSQ platform (the “Platform”) nationwide on July 4, 2022.

On February 23, 2023, we 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”).

On July 19, 2023, in accordance with the plan of arrangement to reorganize PSQ Holdings. Inc, the Company finalized a business combination (the “Business Combination”) with Colombier Acquisition Corp. (“Colombier”). On closing, the common shares of PSQ Holdings Inc. were listed on the New York Stock Exchange and commenced trading under the symbol “NYSE:PSQH”.

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”).

### Recent Developments

### Private Placement

On March 13, 2024, we 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. Our stockholders have approved the issuance of the underlying shares as part of our annual stockholder meeting in April 2024 and the funds were received May 3, 2024.

In August 2024, the Company entered into an agreement for a $10.0 million convertible note in a private placement with a board member and affiliates. Funds were received August 29, 2024. The note has identical terms to the notes offered in March 2024.

### Credova Acquisition

On March 13, 2024, the Company acquired Credova.

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, and other financial institutions authorized by Credova (each a “Financing Partner”), and merchants can dynamically offer certain financing products (collectively, the “Services”).

As consideration for the Credova 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 Closing will be released and distributed pro rata to the former stockholders of Credova.

The acquisition of Credova was accounted for as a business combination using the acquisition method pursuant to ASC 805, *Business Combinations* ("ASC 805"). As the acquirer for accounting purposes, the Company had estimated assets acquired and liabilities assumed as of the acquisition date, with the excess of the purchase price over the fair value of net assets acquired recognized as goodwill.

### Promissory Note Exchange

Prior to the Credova acquisition, 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 closing the Credova acquisition, 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.

### Key Business Metrics and Selected Financial Data

We use the following key metrics and non-GAAP measures to evaluate our performance, identify trends affecting our business, and make strategic decisions:

- Segment Revenue (see discussion below in “Results of Operations”);
- Adjusted EBITDA (see “Non-GAAP Financial Measures” for a discussion of Adjusted EBITDA and a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA); and
- Gross Merchandise Volume (“GMV”) of Financial Technology Segment.

For GMV, these metrics are based on internal company data, assumptions, and estimates and are used in managing our business. We believe that these figures are reasonable estimates, and we actively take measures to improve their accuracy, such as eliminating known fictitious or duplicate accounts. There are, however, inherent challenges in gathering accurate data across large online and mobile populations.

### Adjusted EBITDA

We define adjusted EBITDA, a non-GAAP financial measure, as earnings (loss) before interest expense, income tax expense (benefit), depreciation and amortization, as adjusted to exclude change in fair value of our financial instruments, other income (expense), net, transaction expenses and share-based compensation expense. See “Non-GAAP Financial Measures” for a reconciliation of GAAP net loss to adjusted EBITDA.

### GMV of Financial Technology Segment

In addition to revenue, net loss, adjusted EBITDA, and other results under U.S. GAAP, the following table sets forth key operating metrics we use to evaluate our Financial Technology segment. The information below represents proforma information as if the Credova Merger closed on January 1, 2023:

|  | Three Months Ended September 30, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Gross merchandise volume (“GMV”) | $15,532,649 | $14,133,498 | 10% |

|  | Nine Months Ended September 30, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Gross merchandise volume (“GMV”) | $45,703,460 | $40,074,958 | 14% |

We measure GMV to assess the volume of transactions that take place on our platform. We define GMV as the total dollar amount of all transactions generated from the Financial Technology segment during the applicable period, net of refunds. GMV does not represent revenue earned by us; however, it is an indicator of the success of our merchants and the strength of our platform.

For the three and nine months ended September 30, 2024, GMV was $15.5 million and $45.7 million, respectively, which represented an approximate change of 10% and 14%, respectively, as compared to the same period in 2023. Overall, the increase for the nine months ended September 30, 2024 in GMV was primarily driven by and expanding active merchant base and growth in active consumers, complemented by heightened sales related to election year demand in the firearm segment. Additionally, the increase reflects stronger consumer adoption of our bank-originated financial product.

For the three months ended September 30, 2024, our GMV growth aligned with broader industry patterns historically seen in federal election cycles. According to the National Shooting Sports Foundation (NSSF), there were no month-over-month increases in background checks from December 2023 until July 2024, highlighting a market trend correlated with election-year activity that positively impacted GMV.

For the three and nine months ended September 30, 2024, our top five merchants and platform partners represented approximately 43% and 42% of total GMV, respectively, as compared to 46% for the three months ended September 30, 2023 and 52% for the nine months ended September 30, 2023. GMV attributable to our largest merchant during both the three months and nine months ended September 30, 2024 represented 16 % and 16%, respectively, of total GMV, compared to 20% and 18% for the same period in 2023. The shift in volume from our top five merchants demonstrates healthy diversification in our merchant portfolio and highlights our success in broadening our revenue base.

### Components of Results of Operations

During the three months ended September 30, 2024 and 2023, our net loss was $13.1 million and $20.2 million, respectively, and during the nine months ended September 30, 2024 and 2023, our net loss was $36.9 million and $47.6 million, respectively. During the three months ended September 30, 2024, our net loss decreased $7.1 million as compared to the three months ended September 30, 2023, due to a gain of $2.2 million relating to the change in fair value of the warrant liabilities. This is offset by a $1.7 million increase in our operating loss due to the expansion of the business. During the nine months ended September 30, 2024, our net loss decreased $10.7 million as compared to the nine months ended September 30, 2023, due to the fact that in 2023 there was a $14.6 million loss for the change in fair value of the convertible promissory notes and in 2024 there was a gain of $7.5 million relating to the change in fair value of the warrant liabilities. This is offset by a $17.9 million increase in our operating loss due to the expansion of the business. Following the completion of the Strategic Plan to streamline the organization in October 2024, reducing staff by over 35% and focusing on the people critical to the Company’s B2B focused sales and marketing positioning going forward, our expenses will decline and operations will become more concentrated. We have not been profitable since inception. As of September 30, 2024, our accumulated deficit was $99.2 million. Since inception, we have financed our operations primarily through financing activities.

### Revenues, net

We generate revenues from our three segments: Marketplace, Brands and Financial Technology; a summary of each is described below.

#### Marketplace

Our advertising revenues are derived from short-term, typically multi-month, fixed price contracts for advertising subscription arrangements. Revenues from subscription contracts are recognized using the “over-time” method of revenue recognition. Accordingly, we recognize revenues over-time as the advertisements are displayed over the subscription period and the service is being consumed by the business member simultaneously over the period of service. Over-time revenue recognition is based on an input measure of progress. Each advertisement has a contractual revenue value and an estimated cost. The over-time revenue is recognized over the contract term as the Company performs on its performance obligation.

Additionally, we recognize advertising revenue from push notifications and email blasts at the point of delivery. Push notifications and email blasts are considered delivered when an advertisement is displayed to users.

In June 2024, the Company launched its cost per mille (“CPM”) advertising model. The advertising revenue related to CPM is recognized based on the number of impressions received based on advertising on websites or mobile device applications or as the advertiser’s previously agreed-upon performance criteria are satisfied.

E-commerce revenue is generated from the Platform. 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 at the point of sale on a net basis, which equates to the commission and processing fees earned in exchange for the seller marketplace services.

In the future, in addition to greater levels of advertising revenue expected as a result of the growth of our marketplace, we also expect to realize increased amounts of business-to-business (“B2B”) revenue and e-commerce transactional revenue as we expand our business operations into those areas.

#### Brands

Our brand revenues have been derived primarily from our sale of products and services.

In July 2023, the Company launched the EveryLife business and began to generate revenue through the sale of diapers and wipes to consumers by way of the EveryLife’s website. In November 2023, EveryLife’s products became available for purchase on the Platform. 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.

PSQLink generates recurring software as a service (“SaaS”) revenues through B2B sales by providing its customers with a digital marketing and CRM tool.

#### Financial Technology

The Company principally generates financing revenue from four activities: revenue from sale of loan and lease contracts, 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 loan and lease contracts is recognized at a point in time when the Company satisfies a performance obligation by transferring control of the leases to a third party. Revenue from loans and 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.

For a description of our revenue recognition policies, see Note 3, Summary of Significant Accounting Policies, in our condensed consolidated financial statements.

### Cost of Revenue (exclusive of depreciation and amortization)

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

### Cost of Goods Sold (exclusive of depreciation and amortization)

Cost of goods sold (exclusive of depreciation and amortization) includes the purchase price of merchandise sold to customers, inbound and outbound shipping and handling costs, freight and duties, shipping and packaging supplies and warehouse fulfillment costs incurred.

### Operating Expenses

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.

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

### General and Administrative Expenses

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 decrease in absolute dollars in future periods and decline as a percentage of total revenue over time. Our inability to scale our expenses could negatively impact profitability.

### Sales and Marketing Expenses

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 and marketing expenses will decrease 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.

### Research and Development Expenses

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 PublicSquare Payments ecosystem.

### Depreciation and Amortization Expense

Depreciation and amortization expense consists primarily of amortization of capitalized software development costs.

### Non-Operating Income and Other Items

#### Other (Expense) Income, Net

Other (expense) income, net primarily relates to interest income earned on the money market account and the write-off of an other receivable for the three and nine months ended September 30, 2024.

#### Change in fair value of convertible promissory notes

Changes in the fair value of the convertible promissory notes are recorded in the condensed consolidated statement of operations. The convertible promissory notes 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 convertible promissory notes liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the convertible promissory notes’ issuance date with a charge to expense. The convertible promissory notes were converted to equity at the close of the Business Combination.

#### Change in fair value of earn-out liabilities

Changes in the fair value of earn-out liabilities are recorded in the condensed 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.

#### Change in fair value of warrant liabilities

Changes in the fair value of warrant liabilities are recorded in the condensed consolidated statement of operations. The warrant 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 warrant liabilities at its fair value at each reporting period.

#### Interest Expense, net

Interest expense incurred consists of interest accrued on revolving line of credit and convertible promissory notes issued.

#### Income Tax Expense

We are subject to income taxes in the United States, but due to our net operating loss (“NOL”) position, we have recognized a minimal provision or benefit in recent years. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. We have established a full valuation allowance to offset our U.S. net deferred tax assets due to the uncertainty of realizing future tax benefits from our NOL carryforwards and other deferred tax assets.

### Results of Operations

The results of operations presented below should be reviewed in conjunction with the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 which can be found elsewhere in this document.

The following table sets forth our condensed consolidated statement of operations for the three and nine months ended September 30, 2024 and 2023, and the dollar and percentage change between the two periods:

|  | For the three months ended September 30, 2024 | 2023 | Variance ($) | Variance (%) |
| --- | ---: | ---: | ---: | ---: |
| **Revenues, net** | **$6,540,112** | **$2,030,900** | **$4,509,212** | **222%** |
| Costs and expenses: |  |  |  |  |
| Cost of revenue (exclusive of depreciation and amortization expense shown below) | 609,270 | 569,502 | 39,768 | 7% |
| Cost of goods sold (exclusive of depreciation and amortization expense shown below) | 1,771,109 | 903,672 | 867,437 | 96% |
| Transaction costs incurred in connection with the Business Combination | — | 3,309,597 | (3,309,597) | (100)% |
| General and administrative | 12,295,934 | 4,311,199 | 7,984,735 | 185% |
| Sales and marketing | 4,607,708 | 3,670,309 | 937,399 | 26% |
| Research and development | 973,544 | 1,486,069 | (512,525) | (34)% |
| Depreciation and amortization | 975,090 | 759,745 | 215,345 | 28% |
| Total costs and expenses | 21,232,655 | 15,010,093 | 6,222,562 | 41% |
| **Operating loss** | **(14,692,543)** | **(12,979,193)** | **(1,713,350)** | **13%** |
| Other income (expense): |  |  |  |  |
| Other (expense) income, net | (45,683) | 119,957 | (165,640) | (138)% |
| Change in fair value of convertible promissory notes | — | — | — | NM\* |
| Change in fair value of earn-out liabilities | 170,000 | 450,000 | (280,000) | (62)% |
| Change in fair value of warrant liabilities | 2,175,000 | (7,783,000) | 9,958,000 | (128)% |
| Interest expense, net | (756,760) | (46,690) | (710,070) | 1521% |
| **Loss before income taxes** | **(13,149,986)** | **(20,238,926)** | **7,088,940** | **(35)%** |
| Income tax benefit (expense) | 12,437 | 262 | 12,175 | 4647% |
| **Net loss** | **$(13,137,549)** | **$(20,238,664)** | **$7,101,115** | **(35)%** |

41

|  | For the nine months ended September 30, 2024 | 2023 | Variance ($) | Variance (%) |
| --- | ---: | ---: | ---: | ---: |
| **Revenues, net** | **$15,991,229** | **$2,938,641** | **$13,052,588** | **444%** |
| Costs and expenses: |  |  |  |  |
| Cost of revenue (exclusive of depreciation and amortization expense shown below) | 1,738,729 | 1,189,440 | 549,289 | 46% |
| Cost of goods sold (exclusive of depreciation and amortization expense shown below) | 4,601,360 | 903,672 | 3,697,688 | 409% |
| Transaction costs incurred in connection with the Business Combination | — | 7,048,177 | (7,048,177) | (100)% |
| General and administrative | 33,552,605 | 7,448,015 | 26,104,590 | 350% |
| Sales and marketing | 14,380,677 | 6,739,149 | 7,641,528 | 113% |
| Research and development | 3,147,296 | 3,310,943 | (163,647) | (5)% |
| Depreciation and amortization | 2,202,561 | 2,004,319 | 198,242 | 10% |
| Total costs and expenses | 59,623,228 | 28,643,715 | 30,979,513 | 108% |
| **Operating loss** | **(43,631,999)** | **(25,705,074)** | **(17,926,925)** | **70%** |
| Other income (expense): |  |  |  |  |
| Other (expense) income, net | 110,295 | 173,644 | (63,349) | (36)% |
| Change in fair value of convertible promissory notes | — | (14,571,109) | 14,571,109 | (100)% |
| Change in fair value of earn-out liabilities | 510,000 | 450,000 | 60,000 | 13% |
| Change in fair value of warrant liabilities | 7,497,500 | (7,783,000) | 15,280,500 | (196)% |
| Interest expense, net | (1,434,241) | (210,545) | (1,223,696) | 581% |
| **Loss before income taxes** | **(36,948,445)** | **(47,646,084)** | **10,697,639** | **(22)%** |
| Income tax benefit (expense) | (1,181) | (1,527) | 346 | (23)% |
| **Net loss** | **$(36,949,626)** | **$(47,647,611)** | **$10,697,985** | **(22)%** |

NM\* - Percentage change not meaningful.

### Revenues, net

| Revenues, net: Marketplace | For the three months ended September 30, 2024 | 2023 | For the nine months ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Advertising and e-commerce sales | $717,692 | $875,546 | $2,389,801 | $1,783,287 |
| Brands |  |  |  |  |
| Product sales | 2,824,540 | 1,387,951 | 7,653,505 | 1,387,951 |
| Other sales | 18,789 | — | 37,527 | — |
| Returns and discounts | (228,317) | (232,597) | (642,037) | (232,597) |
| Total Brand revenues, net | 2,615,012 | 1,155,354 | 7,048,995 | 1,155,354 |
| Financial Technology |  |  |  |  |
| Direct revenue | 1,150,951 | — | 2,272,818 | — |
| Interest income on loans | 749,199 | — | 1,850,115 | — |
| Loan and lease contracts sold, net | 1,307,258 | — | 2,429,500 | — |
| Total Financial Technology revenues, net | 3,207,408 | — | 6,552,433 | — |
| Total revenues, net | $6,540,112 | $2,030,900 | $15,991,229 | $2,938,641 |

42

Revenues, net increased by $4.5 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was driven by an increase in Brands sales of $1.5 million, a decrease in Marketplace sales by $0.2 million, and the Credova Merger accounted for an additional $3.2 million in revenue for the three months ended September 30, 2024.

Revenues, net increased by $13.1 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was driven by an increase in product sales and e-commerce of $6.5 million and the Credova Merger accounted for an additional $6.6 million revenue for the nine months ended September 30, 2024.

### Cost of revenue (exclusive of depreciation and amortization)

Cost of revenue (exclusive of depreciation and amortization) increased by $0.04 million, or 7%, and $0.5 million, or 46%, respectively, for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023. The increase was mainly due to an increase in personnel expenses.

### Cost of goods sold (exclusive of depreciation and amortization)

Cost of goods sold (exclusive of depreciation and amortization) increased by $0.9 million, or 96% and $3.7 million, or 409%, respectively, for the three months and nine months ended September 30, 2024 compared to the three months and nine months ended September 30, 2023. The increase was mainly due to the sale of products.

### General and Administrative Expense

General and administrative expense increased by $8.0 million, or 185%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was due to a $1.6 million increase in staffing-related costs, $3.4 million in share-based compensation expense, and $3.0 million increase in other administrative expenses, which include accounting, legal, and other administrative services.

General and administrative expense increased by $26.1 million, or 350%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily due to a $7.7 million increase in staffing-related costs, $10.3 million of share-based compensation expense, $3.3 million of professional services and $4.6 million increase in other administrative expenses, which include insurance, rent, utilities, and other administrative services.

### Sales and Marketing Expense

Sales and marketing expense increased by $0.9 million, or 26%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was due to $1 million of share-based compensation expense and $0.9 million increase in other marketing and public relation activities offset by a reduction in contractors and commissions of $1 million.

Sales and marketing expense increased by $7.6 million, or 113%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was due to $4.5 million of share-based compensation expense and a $3.1 million increase in other marketing and public relation activities.

### Research and Development Expense

Research and development expense decreased by $0.5 million, or 34%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was due to increased capitalization of expenditures related to the development of operating software.

Research and development expense decreased by $0.2 million, or 5%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was due to increased capitalization of expenditures related to the development of operating software.

### Depreciation and Amortization

Depreciation and amortization expense increased $0.2 million, or 28%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily related to the amortization of version 2.0 of the Platform along with amortization of the loan receivable.

Depreciation and amortization expense increased by $0.2 million, or 10%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily related to the amortization of version 2.0 of the Platform along with amortization of the loan receivable.

### Other (Expense) Income, net

Other (expense) income, net changed by $0.2 million and $0.1 million, respectively, for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, is primarily due to interest income earned on the money market accounts partially offset by a write-off of an other receivable.

### Interest Expense, net

Interest expense, net increased by $0.7 million and $1.2 million, respectively, for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023. The increase was due to the interest payable in relation to the convertible promissory notes recorded as of the reporting date, along with interest paid on the Revolving Line of Credit.

### Change in Fair Value of Convertible Promissory Notes

Change in fair value of convertible promissory notes was zero for the three and nine months ended September 30, 2024 compared to zero and $14.6 million for the three and nine months ended September 30, 2023. 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.

### Change in Fair Value of Earn-out Liabilities

Changes in the fair value of earn-out liabilities for the three and nine months ended September 30, 2024 was a gain of $0.2 million and $0.5 million, respectively, compared to a gain of $0.5 million for the three and nine months ended September 30, 2023. The gain was due to a decrease in the fair value of the earn-out liabilities at each reporting period.

### Change in Fair Value of Warrant Liabilities

Changes in the fair value of warrant liabilities for the three and nine months ended September 30, 2024 was a gain of $2.2 million and $7.5 million, respectively, compared to a loss of $7.8 million for the three and nine months ended September 30, 2023. The gain for the three and nine months ended September 30, 2024 was due to a decrease in fair value of the warrant liabilities from December 31, 2023 through September 30, 2024.

### Income Tax Benefit (Expense)

Income tax expense increased by an insignificant amount for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

### Liquidity and Capital Resources

Historically, our primary sources of liquidity have been funds from financing activities. We have reported net losses of $36.9 million and $47.6 million for the nine months ended September 30, 2024 and 2023, respectively, and had negative cash flows from operations of $27.1 million and $18.4 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, the Company had aggregate unrestricted cash and cash equivalents, of $4.7 million and $16.4 million and net working capital of $7.5 million and $17.2 million, respectively.

On October 24, 2024, the Company closed a private investment in public equity transaction (“PIPE”) pursuant to a Securities Purchase Agreement (“PIPE Purchase Agreement”) dated October 22, 2024, for the purchase of $5.35 million of Class A common stock at $2.70 per share with three investors: (i) an affiliate of a PSQH board member, (ii), a party related to a PSQH board member and executive officer, and (ii) an unaffiliated accredited investor (the “Purchasers”) (see Note 17 for additional information).

Our Board of Directors and executive team have outlined a plan to improve the Company’s cash position which involves a variety of cash management initiatives. These initiatives include reduction and reallocation of resources to more profitable segments of the business and reducing corporate operating expenses. The reduction of resources included a staff reduction of 35% performed in October 2024, which resulted in expected future savings of $11.0 million, along with terminating or reducing contractor and consulting agreements. Additionally, the plan considers further options such as completing a capital raise, entering into a revolving line of credit agreement, and refining inventory purchase timing which will reduce excess stock levels.

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

Our future capital requirements will depend on many factors including our revenue growth rate, 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 issuances of 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.

### Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table shows our cash flows provided by (used in) operating activities, investing activities and financing activities for the stated periods:

|  | For the nine months ended September 30, 2024 | 2023 | Variance |
| --- | ---: | ---: | ---: |
| Net cash used in operating activities | $(27,127,434) | $(18,412,328) | $(8,715,106) |
| Net cash used in investing activities | $(949,390) | $(1,866,087) | $916,697 |
| Net cash provided by financing activities | $17,306,560 | $43,203,919 | $(25,897,359) |

### Net Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2024 was $27.1 million compared to $18.4 million used in operating activities during the nine months ended September 30, 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 $17.9 million. This was partially offset by an increase in non-cash expenses for share based compensation and change in fair value warrant liabilities of $14.8 million and $15.3 million, respectively. Also offsetting this was a decrease in cash provided by operating assets and liabilities of $5.8 million.

### Net Cash Used in Investing Activities

Net cash used by investing activities for the nine months ended September 30, 2024 was $0.9 million as compared to $1.9 million the nine months ended September 30, 2023. Cash used by investing activities for the nine months ended September 30, 2024 primarily related to $2.8 million of software development costs offset by $1.7 million net loans held for investment.

### Net Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2024 was $17.3 million as compared to $43.2 million for the nine months ended September 30, 2023. Cash provided by financing activities for the nine months ended September 30, 2024 primarily related to proceeds from the issuance of the convertible note payable of $20.0 million offset by repayments on the line of credit of $2.2 million, compared to $22.5 million of proceeds received for convertible notes payable, $18.1 million of proceeds from the reverse recapitalization, and $2.6 million of proceeds from the issuance of common stock for the nine months ended September 30, 2023.

### Non-GAAP Financial Measures

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.

Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the historical operating performance of our business operations; (iii) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of our management team; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

#### Adjusted EBITDA

We define adjusted EBITDA, a non-GAAP financial measure, as net earnings (loss) before interest and other expenses, net, income tax expense, depreciation and amortization, as adjusted to exclude change in fair value of our financial instruments, other income (expense), net, transaction expenses and share-based compensation expense. We utilize adjusted EBITDA as an internal performance measure in the management of our operations because we believe the exclusion of these non-cash and non-recurring charges allow for a more relevant comparison of our results of operations to other companies in our industry. Adjusted EBITDA should not be viewed as a substitute for net loss calculated in accordance with GAAP, and other companies may define adjusted EBITDA differently.

The following table provides a reconciliation of net loss to adjusted EBITDA to net loss for the periods presented:

|  | For the three months ended September 30, 2024 | 2023 | For the nine months ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net loss | $(13,137,549) | $(20,238,664) | $(36,949,626) | $(47,647,611) |
| Excluding: |  |  |  |  |
| Interest expense, net | 756,760 | 46,690 | 1,434,241 | 210,545 |
| Income tax (benefit) expense | (12,437) | (262) | 1,181 | 1,527 |
| Change in fair value of convertible promissory notes | — | — | — | 14,571,109 |
| Change in fair value of earn-out liabilities | (170,000) | (450,000) | (510,000) | (450,000) |
| Change in fair value of warrant liabilities | (2,175,000) | 7,783,000 | (7,497,500) | 7,783,000 |
| Other expense (income), net | 45,683 | (119,957) | (110,295) | (173,644) |
| Depreciation and amortization | 975,090 | 759,745 | 2,202,561 | 2,004,319 |
| Share-based compensation (exclusive of what is shown above in transaction costs) | 5,796,823 | 1,185,089 | 15,967,598 | 1,185,089 |
| Transaction costs incurred in connection with acquisitions | — | 3,309,597 | 2,295,502 | 7,048,177 |
| Corporate operating expenses | 3,503,643 | 3,774,266 | 11,937,517 | 8,230,417 |
| Adjusted EBITDA | $(4,416,987) | $(3,950,496) | $(11,228,821) | $(7,237,072) |

46

### Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with GAAP. The preparation of consolidated financial statements also requires we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, balance sheet, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving our management’s judgments and estimates. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our balance sheet and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those consolidated financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. Our significant accounting policies are described in Note 3 to our Unaudited Condensed Consolidated Financial Statements for the three-month and nine-month period ended September 30, 2024 included elsewhere in this report. Our critical accounting policies are described below.

### Revenue Recognition

### \[1\]Marketplace Revenues

#### E-commerce revenues

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 commission revenue earned from these arrangements is 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 net of estimated refunds 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 condensed consolidated statement of operations.

#### Advertising services

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.

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.

In June 2024, the Company launched its cost per mille (“CPM”) advertising model. The advertising revenue related to CPM is recognized based on the number of impressions received based on advertising on websites or mobile device applications or as the advertiser’s previously agreed-upon performance criteria are satisfied.

### \[2\]Brand Revenues

#### Product sales

The Company generates revenue through the sale of diapers and wipes to consumers by way of the Company’s Platform and EveryLife’s website. Additionally, EveryLife provides discounted products to non-profit organizations through bulk sales. 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 its 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 product, which occurs at shipment. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products.

The Company evaluated principal versus agent considerations to determine whether it is appropriate to record third-party logistics provider fees paid as an expense. These fees are recorded as shipping and handling expenses within cost of goods sold and are not recorded as a reduction of revenue because the Company owns and controls all the goods before they are transferred to the customer. The Company can, at any time, direct the third-party logistics provider to return the Company’s inventories to any location specified by the Company. It is the Company’s responsibility to process any returns made by customers directly to logistic providers and the Company retains the back-end inventory risk. Further, the Company is subject to credit risk (i.e., credit card chargebacks), establishes prices of its products, fulfills the goods to the customer and can limit quantities or stop selling the goods at any time.

#### Product Returns

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.

#### B2B Sales

PSQLink generates revenues through B2B sales by providing its customers with a digital marketing and CRM platform.

### \[3\]Financial Technology Revenues

#### Financing Revenues

The Company principally generates revenue from four activities: revenue from sale of loan and lease contracts, revenue from interest earned on loans, 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 loans and leases is recognized at a point in time when the Company satisfies a performance obligation by transferring control of the loans and leases to a third party. 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.

### Loans Held for Investment, 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. Accrued 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.

### Allowance for Credit Losses - Loans Held for Investment

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.

### Goodwill and Acquired Intangible Assets

Goodwill and acquired intangible assets recorded in the Company’s financial statements result from both business combinations. Goodwill represents the excess of the purchase price in a business combination over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized as it is estimated to have an indefinite life. As such, goodwill is subject to an annual impairment test.

The Company allocates goodwill to reporting units based on the expected benefit from the business combination. Reporting units are evaluated when changes in the Company’s operating structure occur, and if necessary, goodwill is reassigned using a relative fair value allocation approach. The Company operates in one operating segment, and this segment is the only reporting unit.

ASC 350, *Intangibles—Goodwill and Other (“*ASC 350”) requires goodwill to be tested for impairment at least annually or more frequently if events or changes in circumstances indicate that goodwill may be impaired. The Company elects to perform an annual impairment test of goodwill as of December 31 of each year. The accounting guidance gives the option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment considers events and circumstances that might indicate that a reporting unit’s fair value is less than its carrying amount. If it is determined, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative test is performed.

Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis over the estimated useful life of the respective asset. Each period the Company evaluates the estimated remaining useful lives of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. Acquired indefinite-lived intangible assets are not amortized but are tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the intangible asset may be impaired.

### Capitalized Software

The Company capitalizes costs related to the development of its internal accounting software and certain projects for internal use in accordance with ASC 350-40, *Internal-Use Software* ("ASC 350-40"). 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.

### Warrant Liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification Topic, ASC 815-40, *Derivatives and Hedging (“*ASC 815-40”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company accounts for the Public Warrants (as defined in Note 11) and the Private Placement Warrants (collectively, with the Public Warrants, the “Warrants”) in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the condensed consolidated statements of operations. The Warrants for periods where no observable traded price was available are valued using a Black-Scholes option pricing model. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price will be used as the fair value as of each relevant date.

### Share Based Compensation

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

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 condensed consolidated financial statements based on their fair value.

### Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

We utilize a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We make estimates, assumptions and judgments to determine the provision for income taxes and also for deferred tax assets and liabilities and any valuation allowances recorded against deferred tax assets. Actual future operating results and the underlying amount and type of income could differ materially from our estimates, assumptions and judgments thereby impacting the Company’s financial position and results of operations.

### Business Combinations

The Company evaluates whether acquired net assets should be accounted for as a business combination or an asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the transaction is accounted for as an asset acquisition. If not, the Company applies its judgment to determine whether the acquired net assets meet the definition of a business by considering if the set includes an acquired input, process, and the ability to create outputs.

The Company accounts for business combinations using the acquisition method when it has obtained control. The Company measures goodwill as the fair value of the consideration transferred including the fair value of any non-controlling interest recognized, less the net recognized amount of the identifiable assets acquired and liabilities assumed, all measured at their fair value as of the acquisition date. Transaction costs, other than those associated with the issuance of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.

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 the 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.

When the initial accounting for a business combination has not been finalized by the end of the reporting period in which the transaction occurs, the Company reports provisional amounts. Provisional amounts are adjusted during the measurement period, which does not exceed one year from the acquisition date. These adjustments, or recognition of additional assets or liabilities, reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

## Controls and procedures

As filed, 2,437 characters.

#### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures (as such term is defined in Exchange Act Rule 13a-15(e)) as of September 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of that date, due to the material weakness in our internal control over financial reporting, including controls surrounding the preparation of the unaudited condensed consolidated statement of cash flows. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

Management intends to implement remediation steps to improve our disclosure controls and procedures and our internal control over financial reporting. Specifically, we intend to expand and improve our review process for complex transactions. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications, and onboarding of additional staff with the requisite experience and training to supplement existing accounting professionals.

#### Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2024, the Company had onboarded additional staff with requisite experience as accounting professionals, as well as identified and retained third-party professionals with whom to consult regarding complex accounting applications. Management believes these actions will enhance our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act). Except as noted above, and in the preceding two sentences, there was no change in our internal control over financial reporting during the fiscal quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 183 characters.

There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-047209. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.