Company: IPST
Filing Date: 2025-02-04
Form Type: 424B3
Source: 0001213900-25-010139
Chunk: 154

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-02-04
Form: 424B3
Chunk 154
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 significant inputs not observable in the market, which represents a Level 3 measurement
within the fair value hierarchy. We use a probability weighted expected return method (“PWERM”) and the Discounted Cash Flow
(“DCF”) method to incorporate estimates and assumptions concerning our prospects and market indications into a model to estimate
the value of the notes. The most significant estimates and assumptions used as inputs in the PWERM and DCF valuation techniques impacting
the fair value of the convertible notes are the timing and probability of an initial public offering, de-SPAC Merger, held to maturity,
and default scenario outcomes.

Specifically, we discounted the cash flows for
fixed payments that were not sensitive to our equity value by using annualized discount rates that were applied across valuation dates
from issuance dates of the convertible notes to each reporting period. The discount rates were based on certain considerations including
time to payment, an assessment of our credit position, market yields of companies with similar credit risk at the date of valuation estimation,
and calibrated rates based on the fair value relative to the original issue price from the convertible notes.

Valuation of Warrant Liabilities

The fair value of the warrant liabilities at issuance
and at each reporting period are estimated based on significant inputs not observable in the market, which represents a Level 3 measurement
within the fair value hierarchy. The warrants are free-standing instruments and determined to be liability-classified in accordance with
ASC 480. We use the PWERM and the Monte Carlo Simulation (“MCS”) to incorporate estimates and assumptions concerning
our prospects and market indications into the models to estimate the value of the warrants. The most significant estimates and assumptions
used as inputs in the PWERM and MCS valuation techniques impacting the fair value of the warrant liabilities are the timing and probability
of an initial public offering, de-SPAC Merger, held to maturity, and default scenario outcomes. The most significant estimates and assumptions
used as inputs in the PWERM and MCS valuation techniques impacting the fair value of the warrant liabilities are those utilizing certain
weighted average assumptions such as expected stock price volatility, expected term of the warrants, and risk-free interest rates.

Impairment of Long-Lived Assets

All long-lived assets used are evaluated for impairment
whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Factors that we consider in deciding
when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative
industry or economic trends and significant changes or planned changes