Company: IPST
Filing Date: 2025-02-04
Form Type: 424B3
Source: 0001213900-25-010139
Chunk: 344

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-02-04
Form: 424B3
Chunk 344
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16.)

2023 Series — Convertible Whiskey Special Ops 2023 Notes Warrants

During 2023, the Company issued warrants to purchase
the Company’s common stock to the Whiskey Note holders, including a related party, in an amount equal to the cash proceeds divided
by the exercise price. (see Note 5 and Note 14). These warrants are exercisable on or after the earlier of (i) occurrence of an IPO,
or (ii) August 29, 2024, and expire on August 29, 2028. The warrant exercise price is equal to the lesser of: (i) if the Company consummates
an IPO, 100% of the price per share at which the Company’s common stock is sold in the IPO, or (ii) $10.00 per share. The warrants
will automatically be exercised cashlessly after the three-year anniversary of the issuance date if the stock price hits 125% of the warrant
exercise price. The warrants are free-standing instruments and determined to be liability-classified in accordance with ASC 480. More
specifically, ASC 480 requires a financial instrument to be classified as a liability if such financial instrument contains a conditional
obligation that the issuer must or may settle by issuing a variable number of its equity securities if, at inception, the monetary value
of the obligation is predominantly based on a known fixed monetary amount.

The Company measured the warrant liabilities at
fair value at the respective issuance dates of the Whiskey Notes using a probability weighted expected return method and the Monte Carlo
Simulation. The fair value of the warrant liabilities at the issuance dates in 2023 was approximately $1,621,527, of which $436,041 was
associated with the related party warrant liabilities. The warrant liabilities are subsequently remeasured to fair value at each reporting
date with changes in fair value recognized as a component of total other income (expense) in the consolidated statements of operations.
The Company recorded a net gain of $108,835 (of which $29,267 was to a related party) resulting from the change in fair value of the warrant
liabilities to $1,512,692 (of which $406,774 was to a related party) for the year ended December 31, 2023.

Subsequent to December 31, 2023 and through April
26, 2024, the Whiskey Notes (including 884,116 related warrants) were exchanged (contingent upon