Company: IPST
Filing Date: 2025-12-23
Form Type: 424B3
Source: 0001213900-25-125341
Chunk: 131

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-12-23
Form: 424B3
Chunk 131
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 control. Each block validation represents a distinct performance obligation. For the nine months ended September30, 2025, we recognized blockchain rewards revenue on a gross basis, as we act as principal in the majority of our contracts by providing the $IP Tokens required for staking. Blockchain rewards are recorded in other revenue on the condensed consolidated statements of operations. Revenue is measured based on the number of tokens received and their fair value at contract inception. 75 Cost of Sales We recognize the spirits business cost of sales in the same manner that the related revenue is recognized. Our cost of sales consists of product costs, including manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement costs, fulfillment costs, warehousing costs, and certain allocated costs related to management, facilities and personnel -relatedexpenses associated with supply chain logistics. We recognize the staking and validator business cost of sales in the same manner that the related revenue is recognized. Our cost of sales consists of AWS data center incidences that run the validator protocol and software, financial software to track each token earned and their value, consulting agreements related to managing the validator work and contracted computer programmers to insure validator uptime. Gross Profit and Gross Margin Our gross profit is the difference between our revenues and cost of sales. Gross margin percentage is obtained by dividing gross profit by our revenue. Our gross profit and gross margin are, or may be, influenced by several factors, including: •Market conditions that may impact our pricing; •Our cost structure for manufacturing operations, including contract manufacturers, relative to volume, and our product support obligations; •Our capacity utilization and overhead cost absorption rates; •Our ability to maintain our costs on the components that go into the manufacture of our products; and •Seasonal sales offerings or product promotions in conjunction with plans created with our distributors or retail channels. We expect our gross margins to fluctuate over time, depending on the factors described above. Sales and Marketing Sales and marketing expenses consist primarily of employee -relatedcosts for individuals working in our sales and marketing departments, our tasting room general managers and Cask Club directors, our hourly tasting room sales associates, the executives to whom all general managers report, and the executives whose primary function is sales or marketing, and rent and associated costs for running each tasting room. The expenses include our employee -relatedcosts for our personnel responsible for managing our e -commerceplatform, wages, commissions and bonuses for our outside sales team members who market and sell our products to distributors and retail end users and the associated costs of