Company: IPST
Filing Date: 2025-06-13
Form Type: S-1
Source: 0001641172-25-015121
Chunk: 287

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-06-13
Form: S-1
Chunk 287
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 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 through 2024. 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, the convertible notes meet all applicable criteria for electing fair value option under ASC Topic 825.

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Heritage Distilling Holding Company, Inc.

Notes to Consolidated Financial Statements

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(cont.)

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