Company: IPST
Filing Date: 2025-08-26
Form Type: S-1
Source: 0001213900-25-080839
Chunk: 346

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-08-26
Form: S-1
Chunk 346
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825, the Company records the convertible notes at fair value with changes in fair value recorded as a component of other income (expense) in the consolidated statements of operations. As a result of applying the fair value option, direct costs and fees related to the convertible notes are expensed as incurred and F-57

Heritage Distilling Holding Company, Inc.
Notes to Consolidated Financial Statements NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) are not deferred. The Company concluded it is appropriate to apply the fair value option as they are liabilities not classified as a component of stockholders’ equity/(deficit). In addition, the convertible notes meet all applicable criteria for electing fair value option under ASC Topic 825. Fair value measurements— Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. The valuation hierarchy contains three levels:

| Level 1 — |     | Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets.                                                                                                                                                                              |
| Level 2 — |     | Valuation inputs are quoted prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets and other observable inputs directly or indirectly related to the assets or liabilities being measured. |
| Level 3 — |     | Valuation inputs are unobservable and significant to the fair value measurement.                                                                                                                                                                                                         |

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize observable inputs and minimize unobservable inputs. In determining the appropriate levels, the Company analyzes the assets and liabilities measured and reported on a fair value basis. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. The Company’s financial instruments consist primarily of cash, accounts receivable, inventory and accounts payable. The carrying amount of such instruments approximates fair value due to their short -termnature. The carrying value of long -termdebt approximates fair value because of the market interest rate of the debt. The convertible notes and warrant liabilities associated with the Company’s convertible promissory notes are carried at fair value, determined according to Level 3 inputs in the fair value hierarchy