Company: IPST
Filing Date: 2025-02-04
Form Type: 424B3
Source: 0001213900-25-010139
Chunk: 318

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-02-04
Form: 424B3
Chunk 318
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 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, the convertible notes meet other 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