Company: IPST
Filing Date: 2025-12-19
Form Type: S-1/A
Source: 0001213900-25-123872
Chunk: 132

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-12-19
Form: S-1/A
Chunk 132
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 the reliability of third -partysystems 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. 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 -addedservices that we provide to third parties, including production, bottling, marketing, consulting and other services, including for the TBN, aimed at growing and improving brands and sales. Service revenue is recognized over the period in which the service is provided. Our blockchain rewards revenue is primarily generated through participation in proof -of-stakenetworks, where we validate or create blocks on the Story Network using staking validators we control. In exchange for these validation services, we earn additional $IP Tokens. Revenue is recognized at the point in time when a block is successfully created or validated and the related rewards are transferred to a digital wallet we 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