Company: IPST
Filing Date: 2025-01-27
Form Type: S-1
Source: 0001213900-25-006695
Chunk: 240

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-01-27
Form: S-1
Chunk 240
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 5 — CONVERTIBLE NOTES (cont.)

Exchange of Whiskey Notes

In April 2024, the holders of Whiskey Notes (including 755,919related Warrants based on a $ 5.00per share exercise price) agreed to exchange for common stock (and prepaid warrants). The then outstanding $ 23,311,063in aggregate fair value, (including $ 8,723,321which was with a related party); $ 8,678,433of principal amount, including accrued interest (including $ 3,247,425which was with a related party); $ 6,630,870of proceeds, (of which $ 2,233,000was with a related party) of the Whiskey Notes and related Warrants (Warrant Liability), in accordance with a Subscription Exchange Agreement, exchanged (contingent upon the consummation of the Company’s initial public offering, which occurred subsequent to September 30, 2024, on November 25, 2024) for a total of 2,399,090shares of common stock and 546,927prepaid warrants to purchase common stock (of which 1,203,783shares were with a related party). Such pre-paid warrants will be eligible for exercise without the payment of additional consideration (except the $ 0.001per share exercise price) at any time that the respective holder beneficially owns a number of shares of common stock that is less than 4.99% of the Company’s outstanding shares of common stock for a number of shares that would cause the holder to beneficially own up to 4.99% of the Company’s outstanding shares of common stock, and having no expiration date.

The aggregate fair value of the exchanged Whiskey Notes and related Warrants will be reclassified from liabilities to equity under the terms of the Subscription Exchange Agreement (when the common stock and prepaid warrants are unconditionally issued in exchange for the Whiskey Notes and related Warrants) upon the closing of the Company’s IPO (which occurred subsequent to September 30, 2024, on November 25, 2024) — which is the remaining prerequisite for the unconditional exchange of the Whiskey Notes and related Warrants for equity, at which time, the value of the shares and prepaid warrants will be recorded as common stock at the IPO price(of $ 4.00per share), and the remaining fair value of the Convertible Notes will be recognized as a gain in Change in Value of Convertible Notes on