Company: IPST
Filing Date: 2025-05-07
Form Type: POS AM
Source: 0001641172-25-009076
Chunk: 266

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-05-07
Form: POS AM
Chunk 266
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 the Company has also committed to issue approximately $ 1,894,615in equity compensation (in the form of RSUs or stock options) related to the deferred compensation.

| F-38 |

Heritage Distilling Holding Company, Inc.

Notes to Consolidated Financial Statements

NOTE 10 — ACQUISITION OF THINKING TREE SPIRITS

Business Combinations— On February 21, 2024, the Company purchased all the outstanding stock of Thinking Tree Spirits, Inc. (“TTS”), which was accounted for as a business combination, requiring assets and liabilities assumed to be measured and recorded at their acquisition date fair values as of the acquisition date. The resolution of the contingent earn out payments will be reviewed at each subsequent reporting period, and any increases or decreases in fair value will be recorded in the income statement as an operating gain or loss.

Under the terms of the stock sale, the Company paid the shareholders of TTS $ 670,686($ 720,686, net of $ 50,000held back for post-closing accounting true-ups) using shares of common stock of the Company. The $ 670,686was paid using common stock of the Company at a negotiated price of $ 13.16per share (or 50,958shares), subject to a true-up provision (to the price per share of the Company’s anticipated IPO, if lower — which, as of September 30, 2024, was $ 5.00per share or 134,137shares) that expired on August 31, 2024, but which was subsequently extended by the Parties to after the conclusion of the dissenters rights process under Oregon law (See below).

In September 2024, the Company extended the true-up provision under the terms of the TTS stock sale from August 31, 2024 to the date of settlement of the Thinking Tree Spirits Dissenters Rights Process, resulting in the delay in reclassifying the TTS purchase price liability to equity (under ASC-480). Upon the November 25, 2024 initial public offering at $ 4.00per share, the true-up provision related to the $ 670,686at $ 4.00per share equaled 167,671shares, an increase of 116,713shares over the original 50,958shares, but subject to any reductions for payments made to dissenters. (See below).

ASC 480 requires a financial instrument to be classified as a liability if such financial instrument