Company: IPST
Filing Date: 2025-01-27
Form Type: S-1
Source: 0001213900-25-006695
Chunk: 304

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-01-27
Form: S-1
Chunk 304
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ially all revenue is recognized from sales
of goods or services transferred when contract performance obligations are met. As such, the accompanying consolidated financial statements
present financial information in a format which does not further disaggregate revenue, as there are no significant variations in economic
factors affecting the nature, amount, timing, and uncertainty of cash flows.

Excise taxes— Excise taxes
are levied on alcoholic beverages by governmental agencies. For imported alcoholic beverages, excise taxes are levied at the time of removal
from the port of entry and are payable to the U.S. Customs and Boarder Protection (the “CBP”). For domestically produced
alcoholic beverages, excise taxes are levied at the time of removal from a bonded production site and are payable to the Alcohol and Tobacco
Tax and Trade Bureau (the “TTB”). These taxes are not collected from customers but are instead the responsibilities of the
Company. The Company’s accounting policy is to include excise taxes in “Cost of Sales” within the consolidated statements
of operations, which totaled $ and $ for the years ended December 31, 2023 and 2022, respectively.

Shipping and handling costs— Shipping
and handling costs of $ and $ were included in “Cost of Sales” within the consolidated statements of operations
for the years ended December 31, 2023 and 2022, respectively. Costs are lower in 2023 versus the same time period in 2022 as the Company
transferred fulfillment and shipping responsibility for much of the Company’s eCommerce sales to consumers to a third party.

Stock-based compensation— The
Company measures compensation for all stock-based awards at fair value on the grant date and recognizes compensation expense over the
service period on a straight-line basis for awards expected to vest.

The fair value of stock options granted is estimated
on the grant date using the Black-Scholes option pricing model. The Company uses a third-party valuation firm to assist in calculating
the fair value of the Company’s stock options. This valuation model requires the Company to make assumptions and judgment about
the variables used in the calculation, including the volatility of the Company’s common stock and assumed risk-free interest rate,
expected years until liquidity, and discount for lack of marketability. Forfeitures are accounted for and are recognized in calculating
net expense in the period in which they occur. Stock-based compensation from vested stock options, whether forfeited or not, is not reversed.

In the past the Company granted stock options to
purchase common