Company: IPST
Filing Date: 2025-01-27
Form Type: S-1
Source: 0001213900-25-006695
Chunk: 293

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-01-27
Form: S-1
Chunk 293
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 there are no signs that rates will drop soon. If interest rates continue to rise or remain higher than recent history has experienced, there is a risk it will cost more for the Company to conduct its business or to get access to credit. There is also a risk that consumers may feel increased economic pressure and not be willing to spend on the Company’s goods or services. Management continues to focus on interest rates and their impact on the business, the cost of borrowing and the potential impacts on its future capital-raising efforts. U.S. Government Operations The chance that continued inaction in Congress to secure final passage of annual spending bills puts the Company at risk of a government shutdown, which could impact its ability to secure certain federal permits through the TTB, including transfer in bond permits, and formula or label approvals. Likewise, tribal partners the Company is working with to open HDC branded distilleries and tasting rooms will rely on securing their own TTB permits. Any government shutdown could slow down progress on development, opening or operating those locations.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates— The presentation
of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions
reflected in these consolidated financial statements include the valuation of common stock, common stock warrants, convertible notes,
warrant liabilities, and stock options. Results could differ from those estimates. Estimates are periodically reviewed due to changes
in circumstances, facts, and experience. Changes in estimates are recorded in the period in which they become known.

Fair value option— As permitted
under ASC Topic 825, Financial Instruments(“ASC Topic 825”), the Company has elected the fair value option
to account for its convertible notes issued in 2022 and 2023. In accordance with ASC Topic 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 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