Company: IPST
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001788230-25-000175
Chunk: 262

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Part II, Item 8
Chunk 262
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 of $IP Tokens.

We rely on third-party service providers to perform certain functions essential to our operations. Any disruptions to our service providers’ business operations resulting from business failures, financial instability, security failures, government mandated regulation or operational problems could have an adverse impact on our ability to access critical services and be disruptive to our operations.

We and any transaction Sponsors may be subject to various litigation, regulatory investigations, and other legal proceedings that arise in the ordinary course of our business.

Key Factors Affecting Our Operating Results

Management believes that our performance and future success depend on many factors that present significant opportunities, but also pose challenges, including the following:

Market Price of the $IP Token

We use the fair value method of accounting to report our operating results, in accordance with U.S. GAAP. We currently own approximately 53.2 million $IP Tokens, some of which were acquired at a significant discount to the then market value, and which may be written down to a lower cost per token at any time that the market value of $IP Tokens is lower (impaired) from the previously recorded cost. For each reporting period, our $IP Token treasury will be reflected at the market price of $IP Tokens and the aggregate change in the fair value of our treasury of $IP Tokens will be reflected as a gain or loss in our condensed consolidated statement of operations. For each reporting period, our condensed consolidated statement of operations will reflect a net gain or loss commensurate with the respective change in market value of a $IP Token (across the number of $IP Tokens that we hold in our treasury). Accordingly, assuming the number of $IP Tokens we hold remains constant at approximately 53.2 million, every $1.00 increase in the market value of a $IP Token will represent a gain of approximately $53.2 million that we must recognize; and, conversely, every $1.00 decrease in the market price of a $IP Token will represent a loss of approximately $53.2 million that we must recognize. The more the $IP Token price increases or decreases in the market, the greater the gain or loss we will be required to report, and depending on market conditions from quarter to quarter, we could see significant swings in gains or losses simply due to marking the value of the $IP tokens we hold to their market value.

Pricing, Product Cost and Margins

To date, most of our revenue has been generated by retail sales of our spirits in our retail tasting rooms and through our eCommerce