Company: IPST
Filing Date: 2025-06-04
Form Type: POS AM
Source: 0001641172-25-013501
Chunk: 218

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-06-04
Form: POS AM
Chunk 218
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 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 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 three months ended March 31, 2025 and 2024, there were no transfers between Level 1, Level 2, and Level 3.

Concentrations of credit risk— Financial instruments potentially subjecting the Company to concentrations of credit risk consist primarily of accounts receivable, accounts payable and bank demand deposits that may, from time to time, exceed Federal Depository Insurance Corporation (“FDIC”) insurance limits. To mitigate the risks associated with FDIC insured limits the Company recently opened an Insured Cash Swap (“ICS”) service account at its primary bank. Under terms of the ICS, when the bank places funds for the Company using ICS, the deposit is sent from the Company’s transaction account into deposit accounts at other ICS Network banks in amounts below the standard FDIC insured maximum of $ 250,000