Company: IPST
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001788230-25-000175
Chunk: 368

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Part I, Item 2
Chunk 368
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, location buildout, inventory buildout (including laying down barrels of whiskey for aging) and marketing to grow our presence and brands,our August 15, 2025 PIPE transaction fundamentally changed and improved our asset base, resulted in greatly reduced debts and liabilities, improved our liquidity profile substantially and afforded us the opportunity to initiate our new validator segment, which will generate ongoing recurring revenue from staking activities.At September 30, 2025, we had outstanding aged payables to vendors in the aggregate amount of approximately $3.1 million, inclusive of accrued amounts to service providers who were providing services to us related to our 2024 IPO, along with $0 in secured debt and $2.6 million in unsecured debt. In connection with our recent private placement offering, we reached agreements with our aged vendors that accounted for the bulk of our outstanding payables, along with negotiated payments to our senior secured creditors of cash and prefunded warrants in exchange for elimination of the debt owed to them. The result was an overall reduction in our outstanding current and long-term payables, and secured and unsecured debt, of $19.3 million at the close of the private placement offering. We also renegotiated with our two largest real estate landlords to use less space in exchange for reduced rent on our two most expensive properties starting in August and September 2025. The result of the paydown in payables and debt, along with the reduction in rents, equates to more than $2 million in annual rent and interest savings, or approximately $200,000 per month in less spend, thereby reducing our cash burn significantly.

In addition, in September 2025, we established our $IP Token validator system to begin earning yield from the staking of a significant portion of our 53.2 million $IP Tokens. While our validator operations are in their early stages, we are receiving significant and regular recurring revenue from those services based on the current Story Network activity and the value of the $IP Token in the market. While blockchain activities and market pricing dynamics are always subject to change, if the current trends hold, the amount of revenue we earn each month from validator activities is expected to be sufficient to offset our cash burn for operations with funds left over to acquire more $IP Tokens or to roll the tokens earned as part of our validator efforts back into the validator to create a compounding effect. If nothing were to change in terms of blockchain activity and token pricing, we expect to see our going concern issues resolved as we would have the ability to