Company: IPST
Filing Date: 2025-02-04
Form Type: 424B3
Source: 0001213900-25-010139
Chunk: 319

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-02-04
Form: 424B3
Chunk 319
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 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.

<div align='center'>F-50

Heritage Distilling Holding Company, Inc.
Notes to Consolidated Financial Statements</div>

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

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-term nature. The carrying value of long-term debt 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 described above.

During the years ended December 31, 2023 and 2022,
there were no transfers between Level 1, Level 2, and Level 3.

Convertible notes— The Company’s
convertible promissory notes are recognized initially and subsequently at fair value, inclusive of their respective accrued interest at
their stated interest rates, which are included in convertible notes on the Company’s consolidated balance sheets. The changes in
the fair value of these convertible notes are recorded as “changes in fair value of convertible notes” as a component of other
income (expenses) in the consolidated statements of operations. The changes in fair value related to the accrued interest components are
also included within the single line of change in fair value of convertible notes on the consolidated statements of operations.

Warrant liabilities— The
Company issued certain warrants for the purchase of shares of its common stock in connection with the Company’s convertible notes
(see Note 7) and classified them as a liability on its consolidated balance sheets. These warrants are classified as a liability
under ASC 480 as the Company may settle the warrants by issuing a variable number of its common shares and the monetary value of
the obligation is based solely or predominantly on a fixed monetary amount known at inception. The warrant liabilities are initially recorded
at fair value on the issuance date of each warrant and are subsequently remeasured to fair value at each reporting date. Changes in the
fair value of the warrant liabilities are recognized as a component of other income (expense) in the consolidated statements of operations.
Changes in the fair value of the warrant liabilities