Company: IPST
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001788230-25-000175
Chunk: 328

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Part I, Item 2
Chunk 328
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 and generate consumer demand for our products. Management believes that investment in beverage product innovation will contribute to long-term revenue growth, especially in the premium and ultra-premium segments.

Development of our Cryptocurrency Validator Business

In August 2025, we completed a private placement of pre-funded warrants in which we received 53.2 million $IP Tokens. In September 2025, we completed the testing of a validator to stake a large portion of those tokens to earn yield. By mid-September 2025, we completed the testing and onboarding of the bulk of our $IP Tokens onto the validator, from which we earn significant yield on a daily basis in the form of new $IP Tokens awarded to us. We will report our earnings from our validator services quarterly, reporting the income in U.S. dollars, with the value of any $IP Token rewards to be determined based on the market price of the $IP Token as reported publicly on Coinbase as of the time such rewards are earned. The amount of $IP Tokens we earn, and the value per token, could have significant impact on our overall revenue, gross margins and net income on a quarterly and annual basis, and could add significantly to our overall value proposition as a company. Factors that impact the success of our validator efforts and the value we are attempting to create include, but are not limited to, the overall uptime of our validator, the reliability of third-party systems we use to house and operate our validator efforts, the demand for validating services on the Story Network at any given time or over any given length of time, the number of other validators providing services to the Story Network, other network validators offering similar services at less cost to secure market share at our expense, the integrity and uptime of the Story Network and the demand or lack thereof for any layer 2 apps on the Story Network that drive demand for validator services, among others. The value of our validator efforts and the amount of income we might realize from those efforts are tied directly to the value of the $IP Token in the market at any given time or over any given length of time, and are driven by market dynamics.

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Key Components of Results of Operations

Net Sales

Our spirits business net sales consist primarily of the sale of spirits and services domestically in the United States. Customers consist primarily of wholesale distributors and direct consumers. Substantially all revenue is recognized from products transferred at a point in time when control is transferred, and contract performance obligations are met. Service revenue represents fees for distinct value-added services that we provide