Company: IPST
Filing Date: 2025-02-04
Form Type: 424B3
Source: 0001213900-25-010139
Chunk: 289

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-02-04
Form: 424B3
Chunk 289
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 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 (net of $50,000 held back for post-closing accounting true-ups) using shares of common stock of
the Company. The $670,686 was paid using common stock of the Company at a negotiated price of $13.16 per share (or 50,972 shares), subject
to a true-up provision (to the price per share of the Company’s anticipated IPO, if lower — as of September 30, 2024: $5.00
per share or 134,137 shares) 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.

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). Subsequent to September 30, 2024, upon the November 25, 2024 initial public offering at $4.00 per share, the true-up provision related to the $670,686 at $4.00 per share equaled 167,671 shares, an increase of 116,699 shares over the original 50,972 shares, but subject to any reductions for payments made to dissenters. (See below and also Note 16).

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. In September 2024, under the terms of the TTS stock sale, the true-up provision for the $670,686 purchase price payment
in the form of common stock was extended through the settlement of the Thinking Tree Spirits Dissenters Rights Process (See Note 16).
Once the final determination is made on the amount owed to dissenters, if any, that amount will be deducted from the true-up amount and