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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-K

______________________________________

(Mark One)


x			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 001-42411

______________________________________

~~HERITAGE~~IP ~~DISTILLING~~STRATEGY ~~HOLDING COMPANY~~HOLDINGS, INC.

______________________________________

(Exact name of registrant as specified in its charter)


Delaware						83-4558219
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

9668 Bujacich Road, Gig Harbor, Washington						98332
(Address of Principal Executive Offices)						(Zip Code)

(253) 509-0008

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, par value $.0001 per share			~~CASK~~IPST			The NASDAQ Stock Market LLC

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

As of June 2830, ~~2024~~2025, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common ~~stock~~equity ~~was~~held ~~not~~by ~~listed~~non-affiliates onof ~~any~~the ~~exchange~~registrant orwas ~~over-~~$5,087,728 based upon the~~-counter~~ ~~market~~closing price of $8.14 ~~The~~per share of the registrant’s common stock ~~began trading~~ on The Nasdaq Capital Market on ~~November~~June 2530, ~~2024~~2025.

The number of shares of ~~Heritage~~the ~~Distilling~~registrant’s ~~Holding Company, Inc.~~ common stock outstanding as of ~~April~~March 2531, ~~2025~~2026 was 610,~~921~~283,~~564~~427.

DOCUMENTS INCORPORATED BY REFERENCE

DOCUMENT DESCRIPTION 10-K PART Not Applicable


DOCUMENT DESCRIPTION						10-K PART
Portions of the Registrant's proxy statement related to its 2026 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days after Registrant's fiscal year end of December 31, 2025 are incorporated by reference into Part III of this Report.						III

Table of Contents

TABLE OF CONTENTS

		Page
PART I
	Item 1. Business	3
	Item 1A. Risk Factors	16
	Item 1B. Unresolved Staff Comments	4964
	Item 1C. Cybersecurity	4964
	Item 2. Properties	5065
	Item 3. Legal Proceedings	5065
	Item 4. Mine Safety Disclosures	5165
PART II
	Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	5266
	Item 6. [ Reserved ]	5266
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	5367
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk	7689
	Item 8. Financial Statements and Supplementary Data	7790
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	7790
	Item 9A. Controls and Procedures	7790
	Item 9B. Other Information	78
	Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	78
PART III
	Item 10. Directors, Executive Officers and Corporate Governance	79
	Item 11. Executive Compensation	8679
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	9479
	Item 13. Certain Relationships and Related Transactions and Director Independence	9579
	Item 14. Principal Accountants Fees and Services	9779
PART IV
	Item 15. Exhibits, Financial Statement Schedules	9880
	Item 16. Form 10-K Summary	~~100~~82
Signatures		~~101~~83

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PART I

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are also contained elsewhere in this report. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements include, but are not limited to, statements about:

•risks related to our acceptance, acquisition, holding, use or disposal of Story $IP Tokens (“$IP Tokens”) or other cryptocurrencies, including how the pricing volatility of such cryptocurrencies may affect our balance sheet or profit or loss;

•our ability to manage our $IP Tokens and to create additional revenue as a validator of $IP Tokens or by staking $IP Tokens;

•our ability to hire additional personnel and to manage the growth of our business;

•our ability to continue as a going concern;

•our reliance on our brand name, reputation and product quality;

•our ability to adequately address increased demands that may be placed on our management, operational and production capabilities;

•the effectiveness of our advertising and promotional activities and investments;

•our reliance on celebrities to endorse our products and market our brands;

•general competitive conditions, including actions our competitors may take to grow their businesses;

•fluctuations in consumer demand for craft spirits;

•overall decline in the health of the economy and consumer discretionary spending;

•the occurrence of adverse weather events, natural disasters, public health emergencies, including the COVID-19 pandemic, or other unforeseen circumstances that may cause delays to or interruptions in our operations;

•risks associated with disruptions in our supply chain for raw and processed materials, including glass bottles, barrels, spirits additives and agents, water and other supplies;

•the impact of COVID-19 on our customers, suppliers, business operations and financial results;

•disrupted or delayed service by the distributors we rely on for the distribution of our products;

•our ability to successfully execute our growth strategy, including continuing our expansion in our ~~TBN~~Tribal Beverage Network and direct-to-consumer sales channels;

•quarterly and seasonal fluctuations in our operating results;

•anticipated accounting recognition associated with reports generated for us by outside valuation experts as they relate to the treatment of and accounting for the exchange of certain convertible promissory notes into common stock and prepaid warrants;

•our success in retaining or recruiting, or changes required in, our officers, key employees or directors;

•our ability to protect our trademarks and other intellectual property rights, including our brands and reputation;

•our ability to comply with laws and regulations affecting our business, including those relating to the manufacture, sale and distribution of spirits and other alcoholic beverages;

•the risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions;

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•claims, demands and lawsuits to which we are, and may in the future, be subject and the risk that our insurance or indemnities coverage may not be sufficient;

•our ability to operate, update or implement our IT systems;

•our ability to successfully pursue strategic acquisitions and integrate acquired businesses, products, services or brands;

•our ability to implement additional finance and accounting systems, procedures and controls to satisfy public company reporting requirements;

•our potential ability to obtain additional financing when and if needed;

•the potential liquidity and trading of our securities; and

•risks related to our acceptance, acquisition, holding, use or disposal of bitcoin or other cryptocurrencies, including how the pricing volatility of such cryptocurrencies may affect our balance sheet or profit or loss; and

•the future trading prices of our common stock and the impact of securities analysts’ reports on these prices.

You should read this report, including the section titled “Risk Factors,” completely and with the understanding that our actual results may differ materially from what we expect as expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Considering the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

These forward-looking statements represent our estimates and assumptions only as of the date of this report regardless of the time of delivery of this report or any sale of our common stock. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. All subsequent forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein.

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Item 1. Business

Overview

We ~~are~~operate a ~~craft~~diversified ~~distiller~~business ~~producing,~~centered ~~marketing~~on digital asset–based infrastructure and ~~selling~~intellectual aproperty ~~diverse~~(“IP”) ~~line~~management, ofsupplemented ~~award-winning~~by a legacy craft spirits, ~~including~~operating ~~whiskeys,~~segment. ~~vodkas,~~In ~~gins,~~August ~~rums~~2025, ~~and~~we ~~“ready~~consummated a $220 million offering of our pre-~~to-drink”~~paid ~~canned~~stock ~~cocktails.~~purchase Wewarrants ~~recognize~~in ~~that~~which ~~taste~~we ~~and~~acquired ~~innovation~~53.2 ~~are~~million ~~key~~$IP ~~criteria~~Tokens for ~~consumer~~our ~~choices~~digital inasset ~~spirits~~treasury. The $IP Token is the native utility token of the Story Network, a decentralized layer 1 blockchain that allows network participants to register, license and ~~innovate~~enforce ~~new~~IP ~~products~~assets. ~~for~~Our ~~trial~~strategic infocus involves the continued growth of our ~~company-owned~~validator ~~distilleries~~services using our $IP Tokens to generate yield and ~~tasting~~the ~~rooms.~~possible Wefuture ~~have~~acquisition, ~~developed~~management, ~~differentiated~~and ~~products~~monetization of IP that ~~are~~can ~~responsive~~add value to ~~consumer~~our ~~desires~~balance ~~for~~sheet ~~rewarding~~ and ~~novel~~deliver ~~taste~~more ~~experiences~~revenue and yield.

We ~~compete~~are inamong the ~~craft~~largest ~~spirits~~corporate ~~segment~~holders of $IP Tokens, ~~which~~and iswe ~~the~~actively ~~most~~deploy ~~rapidly-growing~~these ~~segment~~holdings ofto ~~the~~generate ~~overall~~yield ~~$288~~and ~~billion~~service ~~spirits~~revenue ~~market~~through validator operations. ~~According~~We toview ~~the~~our ~~American~~$IP ~~Craft~~Token ~~Spirits~~holdings ~~Association~~as productive assets that support transaction validation, anetwork ~~craft~~security, ~~distillery~~and isIP-centric ~~defined~~economic ~~generally~~activity asacross athe ~~distillery~~Story ~~that~~ecosystem. ~~produces~~We ~~fewer~~established ~~than~~our ~~750,000~~validator ~~gallons~~business ~~annually~~in September 2025 to allow us to derive yield and ~~holds~~revenue anfrom ~~ownership~~our ~~interest~~large of$IP ~~51%~~Token holdings. A cryptocurrency validator is like a digital “notary” or ~~more~~“referee” ofin a ~~distilled~~blockchain ~~spirits~~network. ~~plant~~Its ~~that~~job is ~~licensed~~to bycheck that transactions on the ~~Alcohol~~network are real and ~~Tobacco~~follow ~~Tax~~the ~~and~~network ~~Trade~~rules. ~~Bureau~~Validators also are randomly selected to propose a new block of transactions to be added to the Ublockchain.S. ~~Department~~When ofa ~~the~~participant ~~Treasury~~attempts a transaction, that participant is required to pay a minimum “gas” fee. ~~According~~A participant can opt to ~~the~~pay ~~Craft~~an ~~Spirits~~additional ~~Global~~fee ~~Market~~to ~~Report~~ensure ~~2023~~that ofits ~~Grand~~transaction ~~View~~is ~~Research,~~added to the ~~craft~~blockchain ~~spirits~~more ~~segment~~quickly. ~~had~~These ~~revenues~~fees ofare denominated in ~~excess~~the same cryptocurrency that is evidenced by the blockchain. In the case of the Story Network, these fees are denominated in $21IP Tokens.4 ~~billion~~The invalidator ~~2023~~chosen ~~and~~to propose a block will (when that block is ~~estimated~~successfully toconfirmed ~~grow~~by atthe aother ~~compound~~validator ~~annual~~nodes) ~~growth~~receive ~~rate~~the gas fees for all transactions in the block (known as “~~CAGR”)~~execution oflayer 29rewards”).4% ~~between~~In ~~2024~~addition, ~~and~~the ~~2030.~~Story WeNetwork ~~believe~~automatically weissues ~~are~~$IP ~~well~~Tokens ~~positioned~~as rewards to ~~grow~~validators inthat ~~excess~~successfully ofpropose ~~the~~a ~~growth~~block. ~~rate~~We ofhave ~~the~~elected ~~market~~to bycontinue ~~increasing~~operating our ~~marketing~~own ~~efforts,~~validator ~~increasing~~services ~~the~~rather ~~size~~than ofto “delegate” our ~~sales~~$IP ~~teams~~Tokens ~~and~~to ~~broadening~~third-party ~~our~~validation ~~wholesale~~service ~~distribution~~providers.

~~Out~~In ofparallel ~~the~~with ~~more~~our ~~than~~digital ~~2,600~~asset ~~craft~~management ~~producers in North America~~operations, we ~~have~~continue ~~been~~to ~~recognized~~operate ~~with~~a ~~more~~streamlined ~~awards~~spirits ~~for~~business through our ~~products~~Heritage ~~from~~Distilling ~~the~~Company ~~American~~subsidiary ~~Distilling~~that ~~Institute,~~markets ~~the~~and ~~leading~~sells ~~independent~~award-winning ~~spirits~~craft ~~association~~whiskeys inand ~~the~~select Uflavored spirits.~~S.,~~ ~~than~~Over ~~any~~the ~~other~~past ~~North~~year, ~~American~~we ~~craft~~have ~~distiller~~taken ~~for~~a ~~each~~number of ~~the~~steps ~~last~~to ~~ten~~reduce ~~years,~~the ~~plus~~costs ~~numerous~~associated ~~other Best of Class~~with, ~~Double Gold~~ and ~~Gold~~increase ~~medals~~the revenue from, ~~multiple~~our ~~national and international~~ spirits ~~competitions.~~segment Weand, ~~are~~as ~~one~~a ofresult, ~~the~~our ~~largest craft~~ spirits ~~producers~~business onis ~~the~~becoming ~~West~~increasingly ~~Coast~~asset-light ~~based on revenues~~ and ~~are~~is ~~developing~~focused aon ~~national~~wholesale ~~reach~~distribution, indirect-to-consumer ~~the~~(“DtC”) ~~U.S. through traditional~~ sales ~~channels (wholesale~~, ~~on-premises~~ and ~~e-commerce)~~the ~~and~~expansion of our ~~unique and recently-developed~~ Tribal Beverage Network (“TBN”) ~~sales~~through ~~channel.~~licensing, ~~Based~~royalties, ~~upon our revenues~~ and ~~our~~management ~~continued track record of winning industry awards in an increasingly competitive environment, we believe we are one of the leading craft spirits producers in the United States~~agreements.

WeOur ~~sell~~Operating our products through wholesale distribution, directly to consumers through our five distilleries and tasting rooms we own and operate in Washington and Oregon and by shipping directly to consumers online where legal. Currently, we sell products primarily in the Pacific Northwest with limited distribution in other states throughout the U.S. In addition, in collaboration with Native American tribes, we have recently developed a new sales, manufacturing and distribution channel on tribal lands that we expect will increase and broaden the recognition of our brand as that network expands nationally.Segments

~~Our~~IP ~~growth~~Management strategy is based on three primary areas. First, we are focused on growing our direct-to-consumer (“DtC”) sales by shipping to legal purchasers to their homes where allowed. We currently use a three-tier compliant, third-party platform to conduct these sales and deliveries in 46 states in which approximately 96.8% of the U.S. population reside. This allows us to develop a relationship directly with the consumer through higher-margin sales while collecting valuable data about our best performing products. We can then use this data to target the consumer based on location, age, key demographics and product types. With the data collected, we can also retarget and resell to these customers, thereby generating more revenue. Our board of directors recently created a technology and Cryptocurrency Committee of the Board of Directors and simultaneously adopted a Bitcoin Treasury Policy Statement that lays out a path to our eventual acceptance of bitcoin as a form of payment from customers purchasing our products online and other matters dealing with our handling of bitcoin. We believe this could expand the number of customers who may be interested in buying our products. The Technology and Cryptocurrency Committee will craft a recommended Bitcoin Treasury Policy for the Board to review, consider and adopt prior to us accepting or handing any such assets.Infrastructure

Our ~~DtC~~digital ~~sales~~asset–based ~~also~~infrastructure ~~support~~and ~~our~~IP ~~second~~management ~~growth~~strategy ~~area,~~is ~~which~~intended ~~entails~~to ~~growing~~bring ~~our~~value ~~wholesale~~to ~~volume with~~ our ~~distributors~~stockholders ~~through key national accounts both on-premises and off-premises. By building brand recognition for key products~~ in ~~selected regions or states through DtC sales, we can better support~~ the ~~wholesale~~following launch, marketing and product pull-through of those products in partnership with wholesalers in those targeted states. While DtC sales result in singular high-margin sales, growing volume through wholesale distribution is the most efficient way to drive large-scale growth across retail chains.ways:

~~Third,~~•We weoperate ~~are~~a ~~focused~~number of validator nodes on ~~expanded~~the ~~growth~~Story ofNetwork, including new nodes established under our ~~collaboration~~custody arrangement with ~~Native~~Crypto.com, ~~American~~that ~~tribes~~are ~~through~~used ~~the~~to ~~TBN~~stake ~~model~~our weown ~~created~~$IP Tokens. In ~~concert~~a ~~with~~proof-of-stake ~~tribal partners~~network, ~~this~~such ~~sales~~as ~~channel~~the ~~includes~~Story ~~Heritage-branded~~Network, ~~micro~~validators ~~production~~earn ~~hubs,~~incremental ~~Heritage-branded~~tokens ~~stores~~from ~~and~~their ~~tasting~~efforts ~~rooms~~in ~~and~~securing the ~~sale~~network ofand ~~our~~validating ~~products~~transactions. ~~and~~Third ~~new~~parties ~~tribally-branded~~can ~~products.~~also Indelegate ~~the~~$IP ~~typical~~Tokens ~~TBN~~to ~~collaboration,~~our ~~the~~validator ~~tribes~~node ~~will~~on ~~own~~the ~~these~~Story ~~businesses~~Network ~~and~~for which we ~~will~~typically ~~receive~~earn a ~~royalty~~5% commission on ~~gross~~the ~~sales~~staking ~~through~~rewards ~~licenses~~earned weby ~~grant~~such third parties, which amount is subject to ~~use~~change in our ~~brands,~~discretion ~~products~~at any time and from time to time. At December 31, ~~recipes~~2025, ~~programs~~third parties had delegated 2,387,391.98 $IP Tokens to our validator, none of which had yet been migrated to our new ~~product~~validator ~~development,~~set ~~on-going~~up ~~compliance~~under ~~support~~our custody arrangement at Crypto.com. Any incremental $IP Tokens we earn in our validator operations are treated as revenue for us under GAAP and ~~the~~provide ~~other~~us an additional source of liquidity.

•We plan to strategically and opportunistically engage in the issuance of our securities in the capital markets, which may include the issuance of equity, convertible debt or other securities, to raise capital in an accretive fashion for the benefit of our stockholders to purchase and hold additional $IP Tokens.

•We stake the majority of the $IP Tokens in our treasury to earn a staking yield and turn our treasury into a productive asset. At December 31, 2025, we were staking approximately 81.8% of the $IP Tokens in our treasury. In the first quarter of 2026, we began moving a majority of our $IP Tokens to third-party custodians that will allow us to continue our validator efforts and to stake our $IP Tokens under longer-term contracts to increase yield. Unless we need to sell $IP Tokens to cover operating expenses, we generally intend to keep those $IP Tokens staked going forward. We do not currently hedge our $IP Tokens and do not currently have plans to hedge our $IP Tokens or otherwise engage in decentralized finance activities. Any future hedging or decentralized

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~~support~~finance activities we ~~provide.~~undertake ~~The TBN is expected to form a network of regional production hubs that~~ will ~~support product trials and sampling, and will generate sales of finished, intermediate and bulk spirits depending on location, equipment and market. Importantly, because these premium spirits will~~ be ~~produced~~subject ~~locally,~~to weapproval ~~believe~~by the ~~TBN~~Technology ~~will~~and ~~promote~~Cryptocurrency ~~the~~Committee ~~positioning~~ of our ~~brands~~Board ~~as local~~ and ~~regional. We expect that~~, asif ~~the~~material ~~brands~~in ~~grow~~amount ~~and~~or ~~the TBN footprint expands~~scope, ~~there~~ will be anpublicly ~~important synergy with increased adoption and growth through our wholesale channels in the regions where the TBN locations are driving trial and awareness~~disclosed. ~~Similarly, as demand for our products grow through our wholesale channels, there should be a positive effect on the demand for our products through the tribal distilleries.~~

~~Competitive~~•In ~~Strengths~~September 2025, the Technology and Cryptocurrency Committee of our Board approved our sale of covered call options using less than 2% of the total amount of $IP Tokens we own. On January 6, 2026, the Board increased this authorized amount to 3 million $IP Tokens, which on such date represented approximately 5.6% of the $IP Tokens in our treasury. We sell 30-day covered call options that can be exercised if the price of the $IP Token in the market reaches a price that is 20% to 50% above the $IP Token price at the time the option is sold. To date, we have been earning monthly yields averaging approximately 4% (nearly 60% annually on a compounded basis) while still owning the $IP Tokens underlying such options until such time as the price of the $IP Token in the open market reaches the call threshold.

•At December 31, 2025, 99% of our digital asset reserves consisted of $IP Tokens, with the reminder of such assets held in USDC and a small amount of $ARIA tokens (a layer 2 token that allows for fractional ownership of music rights built on the Story layer 1 blockchain) we acquired in late 2025. We ~~attribute~~do not intend to dedicate any of our ~~success~~treasury-allocated capital to other digital assets outside of those in the ~~following~~Story ~~competitive~~ecosystem. ~~strengths~~We may strategically purchase additional $IP Tokens from time to time, including through over-the-counter transactions and strategic partnerships, which could provide gains for our stockholders.

•~~Premium Aged Whiskeys.~~ We ~~have~~may ~~been~~sell ~~testing, distilling and aging premium whiskeys since~~ our ~~inception~~$IP ~~over~~Token ~~ten~~holdings, ~~years~~whether ~~ago.~~on ~~Unlike many new brands entering~~ the ~~premium~~open ~~craft~~market, ~~whiskey~~through ~~and~~block ~~bourbon~~trades ~~category~~or ~~that~~in ~~rely~~other onnegotiated ~~sourced~~transactions, ~~liquid~~ for ~~their~~various ~~blends,~~reasons ~~we chose to produce~~ and ~~age~~at ~~all~~various oftimes, ~~our~~which ~~own~~may ~~product~~include ~~in-house for our recently-launched super premium whiskey line under our Stiefel’s Select label. This approach has allowed us~~ to ~~leverage~~raise ~~our~~cash ~~experience~~for ~~and~~the ~~our~~repurchase ~~innovative distillation methods while taking advantage~~ of ~~the~~shares ~~Pacific Northwest’s unique climate to produce aged whiskeys that are~~ of ~~the highest quality and authentic to~~ our ~~name.~~common Westock ~~introduced~~when our ~~first~~Board ~~single~~believes ~~barrel~~such ~~selections~~repurchases towill ~~the~~result ~~public~~ in ~~late 2022 under~~ the ~~Stiefel’s~~creation ~~Select~~of ~~brand.~~accretive ~~The~~value ~~initial~~for ~~single~~our ~~barrel~~stockholders ~~selections, which included a four-grain bourbon, a high rye bourbon, a wheated bourbon, a peated bourbon, a 100% rye whiskey~~ and aat ~~single~~such ~~malt~~times ~~whiskey,~~when ~~sold~~it ~~out~~is ~~quickly,~~legally ~~and~~permissible ~~we have begun releasing more single barrel selections~~ to ~~the~~do ~~market~~so. We ~~expect~~may toalso ~~continue~~sell tounlocked ~~release~~$IP ~~these~~Tokens ~~whiskeys~~or as$IP ~~either~~Tokens ~~“single~~earned ~~barrel~~from ~~picks”~~our orvalidating ~~“small~~efforts ~~batch~~in ~~blends” depending on~~ the ~~recipe~~market ~~and~~under ~~target~~certain market. Weconditions ~~have~~to ~~been~~build ~~awarded~~cash ~~a Double Gold Medal~~reserves, ~~Gold~~to ~~Medal~~acquire ~~and~~IP ~~Best~~assets, ofto ~~Category~~grow ~~for~~or ~~our~~launch ~~first~~a ~~releases~~new ofproduct ~~Stiefel’s~~or ~~Select by some of the most prestigious spirits competitions in the world~~service, ~~including~~or atto ~~the~~cover ~~San~~ongoing ~~Francisco International Spirits Competition and the Fred Minnick Ascot Awards~~expenses.

~~•Purposefully~~There ~~Aligned~~can ~~Products. We~~be ~~recently~~no launched a new line of spirits called the Salute Series line of whiskeys in which we created a super-premium whiskey to generate high-margin revenue and raise donations for carefully-vetted non-profit groups that support active dutyassurance, ~~retired and injured special operations heroes~~however, ~~veterans,~~that first responders and their families. Each bottle of our initial release comes in a specially-designed bespoke whiskey tube with a commissioned reproduction lithograph from Michael Solovey, a well-known military artist. Each bottle currently sells for $125, of which $10 is donated to our non-profit partners. Our current partners include 21 national and local charities, such as the ~~Green~~value Beret Foundation, the Marine Raider Foundation, the Honor Foundation, the Special Forces Foundation, the Army Special Operations Association, the Special Operations Memorial Foundation, and the Foundation for Exceptional Warriors, among others. Since the launch of the Army SOF version in late October 2023 through February 28, 2025, we have sold more than 23,000 bottles of Salute Series products directly to consumers in our tasting rooms and online, and to select wholesalers, representing more than $~~1,800,000~~IP inTokens ~~revenue~~will ~~to us and $2~~increase,~~400,000~~ in total value based on retail pricing to the consumer. In May 2024, we launched a three-bottle set commemorating the 80th anniversary of D-Day, also featuring artwork by Michael Solovey depicting the combined air, land, and ~~sea~~investors ~~efforts~~should oncarefully ~~June~~consider ~~6, 1944 along~~ the ~~coast~~risks ofassociated ~~Normandy, France. Since its launch in May 2024, we have sold nearly 7,500 bottles of this limited edition offering,~~ with ~~charitable~~digital ~~components from such sales going to the Green Beret Foundation and other partnering charities~~assets. InSee ~~August~~“Risk ~~2024,~~Factors we— ~~launched~~Risks ~~the~~Related ~~latest product under our Salute Series called War Dogs, and have sold more than 2,500 bottles online through just our DtC e-commerce channel, with charitable components from each sale going~~ to ~~military~~Our ~~K-9~~Cryptocurrency ~~nonprofit~~Treasury ~~groups.~~Reserve InStrategy ~~January 2025, we launched a bottling honoring the 80th Anniversary of the Battle of Iwo Jima~~ and ~~sold~~$IP ~~out~~Tokens” ~~our initial 2,200 bottles in less than three weeks. The D-Day, Iwo Jima; and War Dogs products retail~~ for $95 each, plus taxes and shipping (if shipped DtC), and their rapid adoption among consumers show that we can continue to release affinity driven labels to attract consumer attention and purchase and help us drive more revenue with higher margins. We plan to launch additional ~~versions honoring other branches of the military, first responders and military special occasions~~information. This new product follows on the successful seven years of learnings producing and selling 1st Special Forces Group whiskey, from which we supported Special Forces charities at Joint Base Lewis McChord. We view our new Salute Series line to be a significant new development for our growth.

~~•Compelling~~Our ~~Product~~Cryptocurrency ~~Offerings~~Treasury —Reserve Flavored Craft Spirits and Ready-to-Drink (“RTD”) Segments. We offer a diverse line of traditional and flavored craft spirits and innovative and refreshing canned RTD alcoholic beverages with appealing taste profiles, such as Cocoa Bomb Chocolate Whiskey (which was named “Best Flavored Whiskey in the U.S.” by Whiskey Magazine in February 2025 and then named “World’s Best Flavored Whiskey” at Whiskey Magazine’s global competition in March 2025), Florescence Grapefruit & Policy

On August 15, 2025, we adopted an amended treasury reserve policy that sets out our treasury management and capital allocation strategies. The objectives of this policy include the following:

•fulfilling our goal of pursuing an accumulation strategy with respect to $IP Tokens;

•satisfying our liquidity needs;

•implementing fiduciary control of our cash and investments; and

•maximizing our investment performance within the policy’s parameters and subject to market conditions.

In the policy, our Board has delegated to our Chief Investment Officer and the Technology and Cryptocurrency Committee of our Board responsibility for overseeing the management of our investment portfolio, which includes:

•overseeing the execution of our reserve management activities and the implementation and enforcement of the policy;

•evaluating and approving decisions pertaining to our treasury reserve management (such as amounts, timing, and pricing of acquisitions and dispositions of $IP Tokens and staking or the use of $IP Tokens in decentralized finance protocols); and

•providing updates to the Board and management regarding management of our treasury reserves and implementation of the policy.

Our Chief Investment Officer and the Technology and Cryptocurrency Committee may delegate duties related to the management of our treasury reserves to other personnel within our company or to third-party asset managers as they deem appropriate so long as such officer and committee maintain responsibility for overseeing the performance of such delegated duties and for approving purchases and dispositions of treasury reserve assets.

The policy further provides that $IP Tokens will serve as our primary treasury reserve asset on an ongoing basis, with our primary investment strategy to be focused on maximizing exposure and value accruals related to $IP Tokens. This includes, but is not limited to, staking of $IP Tokens and the operation of a validator for $IP Tokens, and additionally may

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~~Pomelo~~include ~~Vodka~~other cryptocurrencies, ~~Peachy~~cash ~~Bourbon~~or ~~Canned~~other ~~Cocktail~~assets that are required or useful for our activities in connection with our reserve strategy. However, $IP Tokens (including staked $IP Tokens) will at all times comprise at least 95% of our treasury reserves and ~~Blood~~we ~~Orange~~do ~~Vodkarita.~~not ~~This~~intend isto ~~evidenced~~dedicate byany ~~the~~of ~~more~~our treasury-allocated capital to other digital assets other than ~~300~~USDC ~~awards~~or others within the Story ecosystem. Furthermore, we ~~have~~view ~~received~~our ~~over~~$IP ~~the~~Token ~~past~~holdings ~~ten~~as ~~years~~long-term holdings and expect to continue to accumulate $IP Tokens over time. We ~~were~~have ~~the~~not ~~original~~set ~~creator~~any specific target for the amount of B$IP STokens Bwe seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional financings, capital-raising Bor ~~rown~~other Sactivities ~~ugar~~to ~~B ourbon~~purchase ~~(“Flavored~~additional ~~Bourbon”)~~$IP Tokens. Our $IP Token strategy is generally expected to involve, afrom ~~flavored~~time ~~bourbon~~to ~~that~~time, ~~won~~subject ~~“World’s~~to ~~Best~~market ~~Flavored~~conditions, ~~Whiskey”~~(i) byissuing ~~Whiskey~~equity, ~~Magazine~~debt inor ~~London~~other ~~two~~securities ~~years~~or engaging in aother ~~row~~capital-raising —transactions anwith ~~unprecedented~~the ~~feat.~~objective ~~Through~~of using the net proceeds to purchase $IP Tokens, (ii) acquiring $IP Tokens with our ~~recent~~liquid ~~acquisition~~assets ofthat ~~Thinking~~exceed ~~Tree~~our ~~Spirits~~working capital requirements, aand ~~small~~(iii) ~~craft~~the ~~spirits~~purchase ~~producer~~of IP-related assets that produce cash on a regular basis and ~~retailer~~that ~~located~~can inbe ~~Eugene,~~registered ~~Oregon~~on the Story Network, such as music or video catalogue rights. In the event we ~~added~~raise ~~several~~additional capital, our intention is to deploy the vast majority of ~~its~~those ~~super~~proceeds ~~premium~~to ~~spirits~~purchase $IP Tokens in the open market in order to further support our ~~portfolio~~staking and validator activities, subject to any terms that may be negotiated as part of ~~flavored~~such ~~craft~~capital ~~spirits~~raises, ~~including~~and ~~its~~to ~~Butterfly~~begin ~~Pea~~to ~~Lavender~~expand ~~Vodka~~our income-generating holdings to include IP assets that generate cash flow, ~~which~~such ~~was~~as ~~named~~music ~~Vodka~~or video catalogue rights. However, as of the ~~Year~~date of this report, we have no specific plans or agreements in place for ~~2023~~any bycapital-raising ~~Wine~~transaction ~~and~~or ~~Spirits~~for ~~Magazine~~the purchase of additional $IP Tokens or IP rights catalogues in the open market or through negotiated transactions.

~~•Differentiated~~Without ~~Distribution~~the ~~Strategy. We~~prior ~~believe~~written weapproval ~~have~~of the Technology and Cryptocurrency Committee of our Board or the approval of our Board as a ~~strong~~whole, ~~distribution~~we ~~approach~~may not dispose of any of the 53.2 million $IP Tokens that ~~increases~~we acquired in August 2025. We plan to sell $IP Tokens only as needed to meet operational cash flow requirements, to acquire IP-related assets, or to repurchase shares of our common stock. In addition, except for the ~~availability~~sale of covered call instruments on $IP Tokens, we do not currently plan to hedge our ~~brands~~$IP Token holdings or use our $IP Tokens as collateral for loans, and ~~product~~we ~~offerings~~do not otherwise expect to engage in decentralized finance activities with our ~~target~~$IP ~~consumers~~Tokens, as we expect over time to stake at least 90% of the $IP Tokens that we hold in connection with our validator business. Moreover, any future hedging or decentralized finance activities that we undertake will be subject to approval by the Technology and Cryptocurrency Committee of our Board or our Board as a whole.

~~•Direct~~While towe ~~Consumer~~do (not have a formal fork or airdrop policy, in the event of a “~~DtC~~fork” of the blockchain underlying the Story Network resulting in two distinct chains with duplicative holdings on each such chain, we would analyze the distinct chains created by the fork to determine whether one chain would be more valuable than the other, and we may determine to sell the $IP Tokens from one chain in order to purchase additional $IP Tokens on the chain we believe will be more successful. In the event we receive tokens in an airdrop (i.e., a distribution of digital assets other than $IP Tokens), we would evaluate whether such airdropped $IP Tokens are more likely to accrue value outside of our core $IP Tokens treasury. We cannot confirm how we will react to any particular fork or airdrop; however, we plan to disclose our decision regarding any fork or material airdrop periodically after such decisions are made.

~~•We~~Our ~~have~~Staking ~~five Heritage-branded tasting rooms in the Pacific Northwest that allow us to sell directly to consumers and that we use to sample new products and ideas.~~Program

~~•We~~Pursuant ~~also sell through e-commerce and engage in other subscription-based program activities~~ to ~~target~~our ~~customers~~treasury tostrategy, ~~generate recurring revenue and customer loyalty. Commencing~~ in ~~March~~September ~~2023~~2025, we ~~contracted~~began ~~with~~using athe ~~third-party~~vast ~~e-commerce~~majority ~~platform~~of toour ~~sell~~$IP ~~online~~Tokens ~~to consumers~~ in 34our ~~states~~treasury ~~via~~reserve ~~its~~to ~~three-tier~~generate ~~compliant~~a ~~system.~~return Inthrough ~~March~~various ~~2024~~opportunities, wewith ~~ended~~the ~~that~~most ~~relationship~~significant ~~and~~portion ~~began~~being ~~migrating~~allocated to ~~LiquidRails,~~our astaking ~~third-party, three-tier compliant platform that relies on delivery to consumers via licensed retailers~~program. ~~This~~We ~~new~~began ~~platform expands~~ our ~~DtC~~staking ~~outreach~~efforts ~~to 45 states and the District~~ of ~~Columbia and eliminates~~ our ~~shipping~~$IP ~~costs~~Tokens toin ~~the~~late ~~consumer,~~September ~~which~~2025 ~~will~~after ~~help~~several usweeks toof ~~both~~incremental ~~increase net margin and expand our sales opportunities~~testing. ~~Prior~~Our tovalidator ~~March~~operations ~~2023,~~were welaunched ~~shipped~~following ~~directly~~Board-level toapproval ~~consumers~~of ina ~~only~~comprehensive ~~nine~~security ~~states.~~and Weinformation ~~also~~security ~~recently~~framework ~~added~~and ~~our~~were ~~offerings~~funded from our ~~Salute~~existing ~~Series~~resources, ~~line~~with oncosts limited to ~~the~~AWS ~~Seelbach’s~~hosting ~~DtC~~and ~~platform,~~security ~~a third-party~~monitoring, ~~three-tier~~none ~~compliant~~of ~~DtC~~which ~~platform~~are ~~that~~material ~~is well known~~ to ~~whiskey enthusiasts around the country, which expanded~~ our ~~reach~~financial ~~to a new whiskey-focused DtC audience~~position. ~~This~~The ~~sales~~primary ~~method~~challenges ~~allows~~associated uswith tovalidator ~~collect~~operations ~~high-margin~~are ~~sales~~maintaining uptime and ~~consumer~~ensuring ~~data~~resilience toagainst ~~drive~~protocol-level ~~future~~slashing. ~~sales~~We ~~and~~mitigate tothese ~~support~~risks ~~the~~through ~~growth~~redundancy, ofcontinuous ~~our~~monitoring, ~~traditional~~and ~~spirits through the three~~defense-~~tier~~in-depth ~~wholesale~~security ~~system~~controls. ~~The future ability to accept bitcoin as a form of payment~~Currently, ~~upon~~all ~~the~~staked ~~future~~$IP ~~adoption~~Tokens ofwe ahold ~~final~~are ~~Bitcoin~~staked ~~Treasury~~to ~~Policy,~~our ~~for~~own ~~select~~validator ~~online~~nodes ~~sales~~on ~~further~~the ~~differentiates~~Story usNetwork in ~~the~~our ~~space~~own ~~among~~custody ~~our~~accounts ~~competitors~~ and ~~opens~~in upthird-party ~~our~~custodied ~~products to a broader market of consumers and clientele~~accounts.

•In ~~our~~early ~~Cask~~December ~~Club® program~~2025, ~~consumers~~we ~~join~~established asa ~~members~~new ~~and~~validator ~~work~~under ~~with~~a ~~our~~custodian ~~distilling~~account ~~team~~held at Crypto.com, to ~~develop~~which ~~their~~account we moved 1 million $IP Tokens from our own ~~10-liter~~wallet ~~barrel~~for ~~batches,~~testing ~~which~~on ~~are~~the ~~custom~~new ~~aged,~~validator. ~~flavored,~~In ~~bottled~~December 2025, ~~proofed~~we also established new custody arrangements with Bitgo.com and ~~labeled~~Kraken into give us flexibility and diversity for our ~~retail~~future ~~locations~~staking operations. ~~Over~~We began the ~~last~~process ~~ten~~of ~~years~~moving wenearly ~~have~~all ~~demonstrated~~of ~~that~~our ~~this~~$IP ~~program~~Tokens ~~creates~~to ~~repeat~~our ~~customer~~custodied ~~foot~~validators ~~traffic~~ in ~~our~~first ~~tasting~~quarter ~~rooms~~of ~~and~~2026; ~~encourages~~however, ~~members~~we tohave ~~bring~~not ~~friends~~yet ~~and~~determined ~~family~~the tofinal ~~the~~amounts ~~locations~~or topercentages ~~sample~~of ~~products,~~our ~~enjoy~~$IP ~~cocktails~~Tokens ~~and~~that ~~purchase~~will ~~products~~be ofallocated ~~their~~to ~~own~~each custodial account. ItBy ~~also~~moving ~~serves~~$IP asTokens anto ~~innovation~~third-party ~~laboratory~~custodian ~~that~~accounts ~~provides~~where uswe ~~with~~can anstake ~~opportunity~~our $IP Tokens under longer-term contracts, we expect to ~~develop~~receive ~~and~~substantially ~~test~~increased ~~new~~yield. ~~products~~We ~~and~~plan ~~concepts~~to ~~with~~continue ~~the~~evaluating ~~goal~~additional ofcustody ~~bringing~~arrangements ~~the~~with ~~strongest~~new ~~performers~~custodians toas ~~the~~our ~~market~~staking program progresses.

~~•In~~The ~~our~~Story ~~Spirits~~Network ~~Club®,~~penalizes abad ~~DtC~~behaviors ~~subscription~~by ~~service~~validators (specifically, wedouble-signing ~~offer~~blocks ~~members~~and ~~the~~downtime) ~~opportunity~~by toslashing ~~purchase~~out ~~three~~a orfraction ~~four selections~~ of ~~spirits~~their ~~per~~staked ~~year,~~tokens. ~~which~~If ~~are~~a ~~automatically~~validator ~~shipped~~double tosigns ~~their~~for ~~homes~~a orblock, ~~are~~the ~~available~~validator ~~for~~will ~~pick~~get upslashed in5% ~~our~~of ~~tasting~~its ~~rooms.~~

•Wholesale. We have distribution agreements with the two largest spirits distributors in the U.S., Southern Glazer’s Wine and Spirits (“SGWS”) and Republic National Distributing Company (“RNDC”), each of which has a dedicated sales force in our core states of Washington, Oregon and Alaska focused on our portfolios. The revenues of these two distributors in 2024 collectively represented more than 50% of the market share of the total wine and spirits wholesale market in the U.S. Our existing wholesale footprint includes the seven states in the Pacific Northwest (Washington, Oregon, Alaska, Idaho, Montana, Utah and Wyoming), Oklahoma and special-order options in Virginia through the state liquor system. Since the beginning of 2024, we have secured new wholesale distribution in Kansas, Kentucky, and portions of Colorado. We began wholesale distribution in those states in the third quarter of 2024. Our wholesale leadership team is actively meeting with additional distributors in other states, including several large beer wholesalers that are starting to distribute spirits as they see the volumes of beer in decline and the growth of spirits emerging in their markets, to expand our footprint for wholesale sales in 2025 and beyond.

•Tribal Beverage Network. According to 500nations.com, a website focused on Native American tribal casinos and casino gambling, there are currently 245 tribes in the U.S. operating 524 gaming operations in

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29tokens ~~states~~and get permanently jailed, ~~generating~~which ~~annual~~is ~~revenues~~also ofreferred ~~approximately~~to ~~$32~~as ~~billion~~“tombstoned.” InIf ~~most~~a ~~counties~~validator ~~across~~is offline for too long and misses 95% of the Ulast 28,800 blocks, the validator will get slashed 0.S02% of its tokens and get jailed. inA ~~which~~validator ~~there~~will ~~are~~also ~~tribal~~get ~~casinos,~~jailed after self-undelegation if the ~~casinos~~validator’s ~~are~~remaining self-delegation amount is smaller than the ~~largest~~minimum ~~accounts~~self-delegation. ~~for~~A ~~spirits,~~jailed ~~beer~~validator ~~and~~cannot ~~wine~~participate in ~~such~~the ~~counties.~~consensus Weand ~~believe~~earn any rewards; however, a ~~significant~~jailed ~~percentage~~validator ofcan ~~the~~unjail ~~millions~~itself ofafter ~~visitors~~a ~~collectively~~cooldown ~~visiting~~time, ~~those~~which ~~tribal-owned~~is ~~operations~~currently ~~will~~set ~~patronize~~at ~~Heritage-branded~~ten ~~TBN~~minutes. ~~distillery~~After ~~tasting~~ten ~~rooms~~minutes, the validator can call Story’s staking contract to ~~sample~~unjail ~~and~~itself ~~consume~~if ~~cocktails~~its stake is more than the minimum stake amount (1,024 ~~sign~~$IP upTokens), ~~for~~after ~~one~~which orit ~~more~~can participate in the consensus again if it is still within the top 64 validators. One of our ~~subscription-based~~validator ~~member~~nodes ~~programs~~incurred ~~and~~a ~~purchase~~slashing ~~bottles~~event during an early testing phase of ~~spirits~~our validator and prior to goour validator being fully funded. ~~Under~~That ~~this~~event ~~model,~~did ~~the~~not ~~tribes~~have ~~exercise~~a ~~their~~material ~~tribal~~impact ~~sovereignty~~on ~~and~~the ~~enter~~number aof ~~new~~$IP ~~business~~Tokens ~~with~~or ~~significant~~other ~~revenue~~assets ~~and~~we ~~margin~~hold, ~~potential.~~and ~~The~~no ~~TBN~~additional ~~model~~slashing ~~also~~event ~~includes~~or uspenalty ~~working~~has occurred with ~~each~~respect ofto ~~the~~our ~~participating~~validator ~~tribes~~since tothat ~~develop~~time. ~~their~~To ~~own~~date, ~~unique~~our ~~brands~~validators tohave ~~feature~~been inrunning ~~their~~at ~~properties~~greater ~~and~~than ~~regions~~99.98% uptime.

WeThe ~~believe~~Story ~~the~~Network ~~TBN~~currently ~~model~~offers isincremental ~~unique~~staking inrewards ~~the~~for ~~adult~~$IP ~~beverage~~Tokens ~~industry.~~staked ~~To set up this network, we have leveraged the role of our Chief Executive Officer~~ in ~~overturning in 2018~~ a ~~184~~longer-~~year-old~~term ~~law~~smart ~~prohibiting Native Americans from distilling spirits on tribal lands~~contract. WeTo ~~designed~~increase the ~~TBN~~yield toon ~~assist~~our ~~Native~~$IP ~~American~~Tokens, ~~tribes~~beginning in ~~developing~~December ~~a new business~~2025, ~~complementary~~we tohave ~~their~~been ~~existing~~transitioning ~~casino~~our ~~and~~$IP ~~entertainment~~Tokens ~~businesses,~~ to ~~attract~~third-party ~~new~~custodied ~~visitors~~staking ~~and~~as ~~consumers.~~mentioned ~~By working with us~~above, ~~tribes~~and ~~get~~we ~~access~~have toupdated our ~~expertise~~staking ~~and~~strategy ~~our~~to ~~full~~begin ~~portfolio~~allocating ofapproximately ~~brands.~~15% Weof ~~believe~~our ~~this~~$IP isToken aholdings ~~significant~~to ~~new~~long-term ~~business~~staking ~~opportunity for tribes~~ with ~~the~~up ~~potential~~to ~~for~~an ~~strong~~18-month ~~revenue~~deactivation ~~and profit growth~~period, ~~allowing~~which ~~tribes~~provides tous ~~capture~~with ~~the~~rewards ~~full~~that ~~margin~~are ~~benefit~~greater asthan ~~manufacturers and~~ the ~~ability~~rewards toassociated ~~collect~~with ~~and~~$IP ~~keep~~Tokens ~~state~~staked ~~spirits~~in ~~taxes~~a ~~for~~flexible ~~products~~staking ~~made and sold on their sovereign land~~arrangement. WeIn ~~have~~connection ~~already entered into agreements~~ with ~~multiple tribes, including agreements for a new Heritage Distilling branded tasting room that opened at~~ the ~~Stillaguamish~~“activating” ~~Tribe’s~~and ~~Angel~~“exiting” ofprocesses ~~the Winds casino north~~ of ~~Seattle,~~$IP ~~Washington~~Token ~~in October 2024~~staking, ~~the~~any ~~ongoing~~staked ~~construction~~$IP ofTokens awill ~~Heritage~~be ~~Distilling-branded~~inaccessible ~~tasting~~for ~~room at the Tonto Apache Tribe’s Mazatzal Casino in Arizona, which is anticipated to open in late 2025, and~~ a ~~landmark~~period ~~agreement between the Coquille Tribe~~ of ~~Oregon~~time ~~and~~determined ~~the~~by Oregon Liquor Control Board to allow for the first tribal distillery in Oregon. A Heritage Distilling-branded tasting room is under construction and scheduled to open in late 2025 at Coquille’s Mill Casino Hotel & RV Park on the water in Coos Bay, Oregon. This is the first such agreement between a ~~Native~~range ~~American tribe and one~~ of ~~the~~factors, 18resulting ~~liquor control states~~ in ~~the~~certain ~~United~~liquidity ~~States~~risks ~~and~~ that ~~project~~we ~~is under construction with a targeted opening in late 2025~~manage.

~~•Co-Located~~Process ~~Retail~~of ~~Spaces. Our~~Staking ~~marketing~~and ~~plan~~Liquidity ~~includes~~Management. Our ~~partnering~~Chief ~~with~~Investment ~~some~~Officer, members of ~~the~~our ~~most~~management ~~highly-regarded~~team ~~premium~~and ~~craft~~the ~~spirits~~members ~~producers~~of ~~in key regions across~~ the ~~U.S.~~Technology ~~to co-brand~~ and ~~cross~~Cryptocurrency ~~operate~~Committee ~~retail~~of ~~tasting~~our ~~rooms.~~Board ~~Qualified partners must~~ have ~~the~~periodic ~~key~~meetings ~~attributes of high-quality products, a consumer-focused tasting room opportunity~~ to ~~drive~~evaluate ~~trial~~treasury ~~and sales~~operations, ~~and~~including the ~~ability~~staking toof ~~send~~our ~~and~~$IP ~~receive~~Tokens. ~~spirits~~Based inon ~~bulk~~these ~~for~~meetings, ~~localized~~management ~~bottling.~~determines Asthe weallocation ~~and~~of ~~these~~the ~~other~~$IP ~~producers~~Token ~~cross-brand~~treasury ~~our collective tasting rooms~~ to ~~consumers~~the ~~who~~staking doprogram ~~not~~and, ~~otherwise~~if ~~have~~we ~~access~~were to ~~them~~engage inwith ~~their~~outside ~~general markets~~validators, wewould ~~believe~~determine wethe ~~will~~amount ~~collectively~~of bethe ~~driving~~allocation ~~more~~of ~~consumer~~$IP ~~trials~~Tokens ~~and~~to ~~increased~~each ~~sales~~validator, asin ~~well~~an aseffort ~~building~~to ~~co-marketed~~ensure ~~brands~~that inno ~~other~~single ~~regions~~third-party ofvalidator ~~the~~has ~~country~~such ~~without~~a ~~the~~large ~~expense~~percentage of ~~new~~our ~~buildings,~~stake ~~leased~~that ~~spaces,~~it ~~production~~represents ~~capacity,~~concentration ~~employees or other capital expenditures~~risk.

~~•Capital-Efficient~~If ~~and~~we ~~Scalable~~determine ~~Operational~~to ~~Structure. We~~reduce ~~have~~the ~~strategically~~amount ~~structured,~~of ~~and~~the ~~plan~~$IP toTokens ~~continue~~dedicated to ~~structure~~the staking program or change the allocation of $IP Tokens, ~~our~~we ~~organization~~will ~~and~~initiate ~~operations~~an tounstaking ~~minimize~~process and ~~most~~notify the validator of the change, which would effectively ~~manage~~reverse ~~our~~the ~~capital~~delegation ~~investment~~of ~~requirements~~the ~~while~~$IP ~~maintaining~~Tokens ~~flexibility~~from tothe ~~rapidly~~applicable ~~scale~~validator ~~our~~node. ~~production~~$IP ~~capabilities~~Tokens have a cooldown period known as the “deactivation period,” which is the time it takes for the unstaked $IP Tokens to ~~meet~~become ~~consumer~~fully ~~demands~~liquid. WeDuring do this byperiod, ~~utilizing~~the ~~our~~tokens ~~internal~~are ~~distilling~~not ~~and~~actively ~~bottling~~earning ~~capabilities~~rewards, ~~while~~but ~~leveraging~~they aare ~~network~~also ofnot ~~reputable~~yet ~~third-party~~available ~~providers~~for ~~with~~transfer ~~industry~~or ~~expertise~~use. ~~and~~The ~~experience~~length ~~performing~~of ~~various~~this ~~functions~~period ~~falling~~can ~~outside~~vary ofbased ~~our~~on ~~internal~~network ~~core~~conditions ~~competencies~~but is generally 14 days. Once the deactivation period is complete, we will be able to transfer the $IP Tokens as determined by management.

~~For~~Our ~~example,~~staking weprogram ~~are~~involves ~~able~~the totemporary ~~contract~~loss ~~with~~of ~~third-party~~the ~~canning~~ability ~~and packaging companies~~ to ~~pack~~transfer ~~our~~or ~~RTDs~~otherwise ~~rather~~dispose ~~than~~of ~~investing~~our instaked ~~the~~$IP ~~required~~Tokens. ~~equipment~~Under ~~and~~normal ~~supporting~~conditions, ~~infrastructure~~we ~~and~~will ~~personnel~~regain ~~for~~this ~~in-house~~ability ~~canning~~over ~~operations.~~our Weunstaked ~~can~~$IP ~~also~~Tokens ~~source~~within ~~specific~~14 ~~spirits~~days orof ~~buy~~initiating ~~bulk spirits in~~ the ~~market~~unstaking. orHowever, ~~have~~there ~~them~~can ~~produced~~be atno ~~tribal~~guarantee ~~and~~that ~~non-tribal~~such ~~facilities~~process ~~under~~will ~~contract.~~result Wein ~~believe~~our ~~the~~regaining ~~planned~~complete ~~expansion~~control of ~~the~~our ~~TBN~~$IP ~~will~~Tokens ~~also~~in ~~enhance~~time ~~our ability~~ to ~~scale~~satisfy our ~~production,~~current ~~distribution~~obligations. ~~and~~We ~~selling~~maintain ~~operations~~a ~~with~~certain ~~limited~~amount ~~capital expenditures across many regions~~ of ~~the~~liquid ~~U.S.~~$IP ~~while~~Tokens ~~allowing us to retain “local” brand status~~ in ~~those~~our ~~areas.~~treasury Weand ~~plan~~a tocertain ~~continually~~amount ~~review the structure~~ of ~~our~~cash ~~organization and operations, and~~ to ~~make~~ensure ~~any~~that ~~changes~~ we ~~deem~~are ~~necessary,~~able to ~~best~~satisfy ~~accommodate~~ our ~~growth~~current ~~and changing market conditions~~obligations.

~~•Food~~$IP ~~and~~Tokens ~~Beverage Industry Experience. Our executive team~~ and board of directors operate with a focus on human capital management and hold a firm belief that quality people with proven track records can produce quality results. Our leadership team and board of directors are made up of multi-disciplinary executives with proven track records of successfully launching, growing and operating companies of all sizes and across many industries, including in the ~~spirits~~Story ~~industry.~~Network

$IP Tokens are a digital asset that is used to record operations of the Story Network, a decentralized network of computers. Unlike many blockchain platforms that evolved from financial use cases, the Story Network was conceived from the outset as infrastructure for media, entertainment and creative rights ecosystems. The $IP protocol was initially launched in 2025 to address limitations in existing networks for digital rights tracking and interoperability. The network’s development is currently stewarded by Story Foundation, an independent organization that supports open-source development, validator coordination and grants for ecosystem projects. While certain entities such as Story Foundation have influence over the Story Network’s development and governance (which was particularly true during the network’s early years), no single entity owns or operates the Story Network, the infrastructure of which is collectively maintained by a decentralized validator base. The Story Network allows the exchange of $IP Tokens, which are recorded on the Story Network. The $IP protocol and related $IP Tokens can be used to pay for computational services on the Story Network, to mint or manage digital rights objects, or to transfer value in network-native transactions. These tokens can also be exchanged for fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading platforms or in individual over-the-counter transactions.

The Story Network and the related smart contracts in the Story Protocol permissibly allow any individual user or entity to create applications or programs that record their operations on the blockchain. Similarly, users are able to permissionlessly interact with such decentralized applications, subject to any restrictions implemented by the application

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~~Strategies~~developer. ~~for~~Using ~~Growth~~these programs, users can create decentralized applications covering a variety of categories and subsectors, including games, marketplaces, AI agents and many more.

~~Our~~In ~~growth~~order ~~plan~~to ~~focuses~~own, transfer or use $IP Tokens directly on ~~gaining~~the ~~brand~~Story Network, a person generally must have internet access to connect to an access point on the Story Network and ~~product~~set ~~visibility~~up a third-party wallet, ~~thereby~~which ~~increasing~~is ~~sales~~the software that safeguards a user’s key pair (public key plus secret key). $IP Token transactions may be made directly between end-users without the need for an intermediary. To transact on the Story Network, a user, typically through an application such as a wallet or smart contract, will broadcast the transaction to the current leader, who will organize the transactions into shards before the network processes and ~~market~~validates ~~share~~such transactions. Using cryptography and its proof-of-stake consensus mechanism, bythe ~~executing~~Story Network can come to a shared state of the ~~following~~network ~~strategies:~~in a decentralized fashion and without a centralized leader.

~~•Grow~~Prior ~~Brand~~to ~~Recognition~~transacting ~~for~~on ~~Our~~the ~~Principal~~Story ~~Product~~Network, ~~Lines~~a ~~Through~~user ~~High-Margin~~generally ~~DtC~~must ~~Sales. By~~first ~~taking~~install ~~advantage~~on ofits ~~the~~computer ~~internet~~or ~~and~~mobile ~~targeted~~device ~~digital~~a ~~marketing,~~software weprogram ~~can~~that ~~place~~will ~~our~~allow ~~brands~~the inuser ~~front of consumers and make direct sales~~ to ~~them. These sales~~ generate ~~high-margin~~a ~~revenue~~private ~~for us while building our customer database~~ and ~~product~~public ~~data.~~key Wepair ~~plan~~such toas ~~further~~a ~~leverage direct-to-consumer sales through company-owned tasting rooms, through the TBN and through co-located tasting rooms~~wallet. ~~Growing~~The onwallet ~~our~~also ~~successful~~enables ~~launch of~~ the ~~Army~~user ~~Special~~to ~~Operations~~connect ~~Salute,~~to ~~our D-Day 80th Anniversary and 80th Anniversary of~~ the ~~Battle~~Story ~~of Iwo Jima editions~~Network, ~~our~~interact ~~recent~~with ~~War~~decentralized ~~Dogs bourbon~~applications, and ~~adding~~transfer ~~new~~or ~~versions~~swap ~~for~~$IP ~~other~~Tokens ~~branches of the military, first responders and military special events, we expect that our Salute Series line of spirits will be an important part of our accelerating reach~~ with ~~consumers.~~other Weusers ~~believe~~or the future addition to our online sales platform of a feature allowing customers to purchase our products using bitcoin as a form of payment will further drive attention and focus on our products and brands and expose us to new customersapplications.

~~•Grow~~Each ~~Our~~user ~~Principal~~has ~~Product~~its ~~Lines~~own ~~Through~~key ~~High~~pair that is stored in such software, like a wallet. To receive $IP Tokens in a peer-~~Volume~~to-peer ~~Distribution~~transaction, the $IP Token recipient must provide its public key to the party initiating the transfer. By ~~leveraging~~This activity is analogous to a recipient for a transaction in U.S. dollars providing a routing address in wire instructions to the ~~data~~payor weso ~~collect~~that cash may be wired to the recipient’s account. The payor approves the transfer to the address provided by the recipient by “signing” a transaction that consists of the recipient’s public key with the private key of the address from ~~our~~where ~~DtC~~the ~~sales~~payor is transferring the $IP Tokens. The recipient, wehowever, ~~plan~~does tonot ~~continue~~make public or provide to ~~produce~~the ~~and~~sender ~~sell~~its ~~innovative,~~private ~~premium-branded~~key ~~products~~(though ~~through~~the ~~our~~network ~~primary~~can ~~channels~~still verify the validity of ~~distribution~~the signature — i.e., ~~These~~that ~~channels~~it ~~consist~~was signed by the holder of ~~wholesale~~the ~~distribution~~private tokey ~~retail~~— ~~establishments~~using ~~such~~cryptography). asAs ~~retail~~we ~~supermarkets,~~migrate ~~liquor~~our ~~stores~~$IP Tokens to custodied accounts, ~~state~~we ~~liquor~~will ~~stores~~maintain (private keys in ~~control~~compliance ~~states),~~with ~~hotels,~~their ~~casinos~~custodian account protocols. We will also use physical keyfobs and two-factor authenticator apps to access the custody accounts. For $IP Tokens we hold outside of our custodied accounts, ~~bars~~we maintain all of the private keys and ~~restaurants~~we do not currently have insurance that would cover any loss of those $IP Tokens from those non-custodied accounts. $IP Tokens held in custodied accounts are covered against loss only to the extent of the insurance coverage limits provided by the custodians.

~~•Grow~~Story ~~the~~Network ~~TBN~~validators ~~model. One~~record ofand ~~our~~confirm ~~primary~~transactions ~~focus~~when ~~areas~~they isvalidate ~~the~~and ~~expansion~~add blocks of ~~the~~information ~~TBN~~ to ~~create~~the aStory ~~national~~Network ~~network~~blockchain. ofWhen ~~tribal~~a ~~spirits~~validator ~~production~~is ~~and~~selected ~~retail~~to ~~operation~~validate ~~locations~~a inblock, orit ~~around~~creates ~~tribal~~that ~~casinos~~block, ~~and~~which ~~high-foot-traffic~~includes ~~entertainment~~data ~~districts~~relating onto ~~tribal~~(i) ~~lands. We believe these operations will benefit from~~ the ~~fact~~verification ~~that,~~of asnewly ~~sovereign~~submitted ~~nations,~~and ~~tribes~~accepted ~~are~~transactions ~~exempt~~and ~~from~~(ii) a ~~variety~~reference ofto ~~state~~the ~~and~~prior ~~local~~block ~~zoning~~in ~~and~~the ~~construction~~Story ~~codes~~Network ~~and~~to ~~can~~which ~~collect~~the ~~and~~new ~~keep~~block ~~state~~is ~~and~~being ~~local~~added. ~~excise~~The ~~and~~validator ~~sales~~becomes ~~taxes~~aware onof ~~the~~outstanding, ~~products~~unrecorded ~~they~~transaction ~~produce~~requests ~~and~~through ~~sell~~peer-to-peer ondata ~~tribal~~packet ~~lands,~~transmission ~~along~~and ~~with~~distribution ~~distributing~~discussed ~~products to their own properties~~above.

~~•Continue~~Upon tothe ~~Innovate~~addition ~~New~~of ~~Products. We plan to continue to employ~~ a ~~synergistic~~block ~~process~~ of ~~rapid~~$IP ~~development~~Token ~~and~~transactions, ~~testing~~the ofStory ~~new~~Network ~~products~~software ~~through~~program ~~DtC~~of ~~sales,~~both ~~sampling~~the inspending ~~our~~party ~~company-owned distilleries~~ and ~~tasting rooms and, in collaboration with~~ the ~~TBN,~~receiving ~~selling~~party ~~products~~will toshow ~~consumers~~confirmation inof ~~our~~the ~~Heritage-branded~~transaction ~~TBN distilleries. Once we obtain positive feedback~~ on ~~a new product, we can then launch it for sale directly to consumers via~~ the ~~internet~~Story toNetwork ~~generate~~blockchain ~~revenue~~ and ~~collect~~reflect ~~more~~an ~~data~~adjustment ~~from~~to ~~consumers across~~ the ~~country.~~$IP ~~With~~Token ~~new~~balance ~~data~~ in ~~hand,~~each weparty’s ~~can~~Story ~~make~~Network ~~decisions~~public ~~with~~key, ~~our~~completing ~~wholesale partners on which products should be taken to~~ the ~~wholesale~~$IP ~~market~~Token transaction. ~~This~~Once ~~direct-to-consumer~~a ~~launch~~transaction ~~model~~ is aconfirmed ~~strategy~~on wethe ~~have~~Story ~~utilized~~Network ~~since our inception. It has been an important part of our ability to launch~~blockchain, ~~test,~~it ~~re-formulate~~is ~~and re-launch products that have subsequently proven to be appealing to consumers~~irreversible.

•Continue to Innovate Marketing Through the Adoption of Artificial Intelligence (“AI”). We plan to continue testing new AI technology, methods and tools focused on the creation of content, designs, themes and audience identification to maximize the efficiency of our marketing efforts.Validators

~~Market~~In proof-of-stake, validators risk or stake coins or tokens to be randomly selected to validate transactions and are rewarded for performing their responsibilities and behaving in accordance with protocol rules. Malfunctions that cause validators to go offline and, in turn, inhibit them from performing their duties can result in financial penalties. Any malicious activity, such as making incorrect attestations or otherwise violating protocol rules, may result in lower rewards or the lost opportunity to gain rewards. The penalty varies depending on the type of offense and correlation to potential offenses by other validators.

WeValidators ~~believe we~~ are ~~well~~typically ~~positioned~~professional tooperations ~~grow~~that asdesign ~~the~~and ~~overall~~build ~~spirits~~dedicated ~~market~~machines ~~continues its growth at the expense of beer~~ and ~~wine.~~data ~~Recent~~centers, ~~studies~~including ~~demonstrate~~“clusters,” ~~that~~which ~~the~~are ~~spirits~~groups ~~market is growing annually in terms~~ of ~~total~~validators ~~alcohol~~that ~~volume~~act cohesively and ascombine atheir ~~percentage~~processing ~~share~~to ofconfirm ~~alcohol dollars~~transactions. ~~According~~When toa ~~drink~~validator ~~market~~confirms ~~analysis~~a ~~firm IWSR~~transaction, athe ~~leading~~validator ~~source of data~~ and ~~intelligence~~any inassociated ~~the~~stakers ~~alcoholic~~receive ~~beverage~~a ~~market,~~fee ~~spirits~~comprised ~~have~~of ~~gained~~a ~~market~~protocol-generated ~~share~~reward ~~among other alcoholic beverages continuously since 1998 (23 years), as consumers trend away from beer~~ and ~~wine~~transaction ~~into~~fees ~~spirits.~~for ~~From~~transactions ~~2000~~included toin ~~2023,~~ the ~~market~~validated ~~share~~block. ofThe ~~spirits~~Story byNetwork ~~value~~protocol ~~increased~~splits ~~nearly~~fees 13into ~~percentage~~two ~~points,~~components: ~~from 29% to 42%, according to~~ a ~~2024~~base ~~Distilled~~cost ~~Spirits~~and ~~Council~~priority ~~of the United States (DISCUS) report, an increase in total dollar value of $11~~fee.7 ~~billion.~~ The ~~same~~base ~~report~~cost ~~noted~~is ~~that~~removed ~~2023~~from ~~was~~circulation, ~~the~~or ~~second straight year in which spirits revenues for suppliers surpassed beer supplier revenue~~“burned”, ~~making~~and ~~spirits~~ the ~~largest~~priority ~~dollar~~fee ~~share~~is ofpaid ~~the~~to ~~alcohol beverage market in the U~~validators.S. ~~IWSR anticipates that by 2029~~Additionally, ~~for~~certain ~~the~~actions ~~first time ever, beer will no longer represent the largest percentage of alcoholic beverage sales~~ by ~~volume.~~validators ~~Grandview~~and ~~Research~~delegators ~~estimated~~require ~~the~~one ~~North~~$IP ~~American~~Token ~~spirits market~~ to be ~~$216~~burned.6 ~~billion~~During inthe ~~2023,~~course ~~growing at a CAGR~~ of ~~6.3%~~ordering ~~from~~transactions ~~2024~~and tovalidating ~~$312.5~~blocks, ~~billion~~validators bymay ~~2030.~~be ~~Because~~able ~~spirits~~to ~~are~~prioritize ~~worth~~certain ~~more~~transactions ~~per ounce~~ in ~~the~~return ~~market~~for ~~than~~increased ~~beer,~~transaction ~~as the spirits volume occupies more of the consumer share~~fees, ~~the~~an ~~value~~incentive ofsystem ~~that~~known ~~share for spirits~~ as a“Maximal ~~percentage~~Extractable ofValue” ~~all~~or ~~alcohol~~“MEV.” ~~dollars~~For ~~spent~~example, ~~will~~in beblockchain ~~even~~networks ~~higher.~~that Wefacilitate ~~believe~~decentralized wefinance ~~are~~(DeFi) ~~leaning~~protocols ~~into~~in ~~the~~particular, ~~market~~such ~~just~~ as the ~~rate~~Story ~~of increase in spirits volume and value are set to achieve historic growth~~Network, ~~making~~users usmay ~~well~~attempt ~~positioned~~ to ~~grow~~gain ~~with~~an ~~the~~advantage ~~predicted~~over ~~growth~~other ofusers ~~the~~by ~~overall~~offering ~~spirits~~greater ~~segment~~transaction fees.

Table of Contents

~~According~~Validators toless ~~IWSR,~~commonly incapture ~~2015,~~MEV ~~craft~~in ~~spirits volume market share was just 2% of~~ the ~~total~~Story ~~spirits~~Network ~~market; by 2020~~because, ~~this~~unlike had more than doubled to almost 5%. An even greater gain was seen in value terms, with 2015’s market share of 3% increasing to 7% by 2020. IWSR predicts that by 2025, craft spirits are forecasted to increase their volume market share to nearly 10%, and over 13% in market share value. This growth is in line with historic and current trends across the ~~craft~~Ethereum ~~beer market from its inception in the 1980s~~network, ~~which initially represented less than 1% of~~ the ~~overall~~Story ~~beer~~Network ~~market~~does ~~and~~not ~~now~~publicly ~~commands~~expose ~~more~~transactions ~~than~~before ~~20%~~they ofare ~~the~~accepted ~~beer market~~ by ~~volume.~~a ~~IWSR posits that the driving force behind this growth will be the expansion of national distribution of craft spirits, some of which will be the result of acquisitions by larger groups~~validator. Confirming the IWSR predictions, the American Craft Spirits Association annual data projects for 2021 through 2024 show that the market share for craft spirits doubled from 3% of the spirits market in 2015 to 7.5% in 2023.

~~Due~~Staking torewards ~~our~~on ~~position in~~ the ~~craft~~Story ~~spirits~~Network ~~segment~~are ofdetermined by the ~~overall~~protocol ~~spirits~~and ~~market, we~~ are ~~situated~~distributed into ~~the~~validators ~~fastest-growing~~and ~~segment~~their ofassociated ~~the~~stakers ~~spirits~~based ~~market,~~on ~~which itself is~~ the ~~highest~~proportion ~~growth segment~~ of ~~the~~their ~~adult~~stake ~~beverage~~relative ~~market. In addition, according~~ to the ~~Distilled~~total ~~Spirits~~active ~~Council~~stake ofin ~~The~~the ~~United~~network. ~~States,~~The ~~consumers~~rewards are ~~increasingly~~funded ~~shifting~~by ~~towards~~inflationary ~~higher~~issuances ~~premium~~of ~~products~~new intokens ~~the~~and ~~spirits~~transaction ~~market,~~fees ~~with~~collected ~~spirits~~on ~~brands in~~ the Unetwork.S. ~~enjoying~~The aspecific ~~multi-decade-long~~amount ~~trend~~each ~~towards~~validator ~~high-end~~ and ~~super~~staker ~~premium~~receives ~~products.~~depends ~~Goldman~~on, ~~Sachs~~among ~~Equity~~other ~~Research~~things, ~~predicts~~their ~~super~~share ~~premium spirits products will soon represent almost 38%~~ of the ~~overall~~total ~~spirits market~~stake, ~~and~~the ~~spirits~~validator’s ~~have~~uptime ~~also~~and ~~demonstrated~~performance, toand ~~be recession resistant in~~ the ~~U.S.~~overall ~~over~~network ~~time, with a correlation coefficient of 0~~conditions.~~002 since 1962 by volume.~~

~~Our~~Staking ~~Brands~~rewards on the Story Network are variable and ~~Products~~are not static. Reward rates fluctuate based on several factors, including (i) the length of the staking lock-up period selected by token holders, (ii) the total amount of tokens staked across the network at any given time, and (iii) overall network activity levels. As of December 31, 2025, the range of current staking rewards displayed on the Story Network staking dashboard (available at https://staking.story.foundation/) was approximately 5.88% to 11.76%. The historical range of staking rewards on the Story Network has varied due to differing levels of network congestion and protocol parameters. The actual annualized reward rate has fluctuated over time, reflecting changes in network activity, inflation rates and protocol adjustments.

~~When~~Staking werewards ~~first~~on ~~opened~~$IP inTokens ~~2012,~~are wedistributed ~~produced~~at ~~only~~regular aintervals. ~~limited~~At ~~line~~the end of ~~traditional~~each ~~spirits products. However~~epoch, inwith ~~response~~one toepoch ~~customer~~being ~~demand~~roughly ~~and~~two ~~consumer testing that we performed through our tasting rooms~~days, ~~we moved into~~ the ~~flavored~~reward ~~segment~~is ~~in 2014 and launched 22 different flavored vodkas~~calculated. AsThe ~~sales~~reward ~~increased,~~is weautomatically ~~offered~~distributed ~~eight products through local distribution and over time have winnowed those products down to a core six flavors~~ at ~~wholesale.~~the Inbeginning ~~2014, we created a line~~ of ~~spirits products under~~ the ~~BATCH~~subsequent Noepoch. 12This ~~trade~~regular ~~name~~reward ~~that~~frequency weensures ~~still~~that ~~sell~~participants ~~today~~receive ~~and~~their isshare ~~primarily~~of ~~featured~~rewards in ~~the well at on-premise accounts. It provides~~ a ~~baseline~~timely ofmanner, ~~volume~~reflecting ~~for~~their uscontribution ~~as we execute on our plan~~ to ~~transition~~network tosecurity ~~higher-margins~~and ~~spirits~~transaction validation.

InUse ~~2015, we launched 1st Special Forces Whiskey, a premium brand positioned towards active-duty military, retired military, military families, and others supportive~~ of ~~the~~Custodians armed forces in the Pacific Northwest, where the 1st Special Forces Group is stationed at Joint Base Lewis McChord (“JBLM”). We have produced seven blends of Special Forces Whiskey annually since 2015, and aStorage ~~portion~~ of ~~the sales proceeds of this brand are donated by us to special forces charities annually. These donations currently support the 1st Special Forces Group at JBLM, and we have raised more than~~ $~~150,000~~IP for charities at JBLM to support military personnel and their families. We are expanding this concept to the multiple Special Forces groups across the country with a greater emphasis on distribution in more states and direct to consumer shipping through our e-commerce platform. Our new Salute Series line of whiskeys consists of various bottlings branded for U.S. military branches and first responders. Since the launch of the Army SOF version in late October 2023 through February 28, 2025, we have sold more than 23,000 bottles of our Salute Series brand directly to consumers in our tasting rooms and online, and to select wholesalers, representing more than $1,800,000 in revenue to us and $2,400,000 and brand value based on retail pricing to the customer. In August 2024, we launched under our Salute Series called War Dogs and have sold more than 2,500 bottles online through just our DtC e-commerce channel, with charitable components from each sale going to military K-9 nonprofit groups. In January 2025, we launched a bottling honoring the 80th Anniversary of the Battle of Iwo Jima and sold out our initial 2,200 bottles in less than three weeks. The D-Day, Iwo Jima; and War Dogs products retail for $95 each, plus taxes and shipping (if shipped DtC), and their rapid adoption among consumers show that we can continue to release affinity driven labels to attract consumer attention and purchases and help us drive more revenue with higher margins.Tokens

~~There~~We ~~are~~currently ~~approximately~~self-custody 18the vast majority of our 53.32 million ~~active-duty~~$IP ~~military~~Tokens, ~~and~~but ~~retirees~~we inhave begun the Uprocess of moving our $IP Tokens into third-party custodied accounts.~~S.,~~ ~~including~~In ~~National~~early ~~Guard~~December 2025, ~~Air~~we ~~National~~established ~~Guard~~a ~~and~~new ~~reservists~~validator inunder ~~each~~a ~~branch~~custodian ofaccount ~~the~~held ~~military~~at Crypto.com, ~~Assuming~~to which account we moved 1.5 ~~dependents~~million ~~per~~$IP ~~person~~Tokens (afrom ~~dependent~~our isown ~~defined~~wallet byfor the ~~military~~testing asof aour ~~spouse~~new validator. In December 2025, ~~child~~we ~~under~~also 21established ~~unmarried~~new orcustody ~~under~~arrangements 23with ifBitgo.com aand ~~student,~~Kraken ~~parent~~to orgive ~~custodian~~us ~~dependent),~~flexibility ~~the~~and ~~total~~diversity ~~population~~for ofour ~~active~~future ~~military,~~staking ~~retired~~operations. ~~military~~We ~~and~~plan ~~dependent~~to ~~affiliated~~move ~~persons~~nearly isall ~~45.75~~of ~~million~~our ~~people.~~$IP ~~There~~Tokens ~~are~~to ~~another~~these ~~660,000~~custodians ~~active-duty~~for ~~civilian~~our ~~law~~validator ~~enforcement~~program ~~officers~~in the first quarter of 2026, 1the ~~million~~mix ~~career~~of ~~and~~which ~~volunteer~~is ~~firefighters,~~yet ~~more~~to ~~than~~be 5determined. ~~million~~In ~~registered~~doing ~~nurses~~so, ~~and~~we ~~more~~will ~~than~~then 1be ~~million~~able ~~certified~~to ~~EMTs,~~stake ~~plus~~our ~~millions~~$IP ofTokens ~~retirees~~under ~~and~~longer-term ~~affiliated~~contracts ~~family~~to ~~members~~increase yield. We ~~believe~~have implemented strict governance protocols to ensure security of the ~~new~~assets ~~Salute~~we ~~Series~~hold. ~~line~~We will continue to ~~garner~~evaluate aour ~~growing~~current ~~following~~custodians’ ~~given~~financial ~~the~~positions, ~~specialty~~insurance ~~packaging~~coverage, terms, level of service and ~~non-profit~~security ~~charitable~~practices ~~partnerships~~and, using such criteria, we ~~are~~will ~~forming~~continue to ~~support~~evaluate ~~the~~other ~~launch~~potential ~~and~~custodians ~~sale~~in of the ~~line~~market.

OnOverview ~~February~~of ~~21, 2024, we acquired Thinking Tree Spirits, a small craft spirits producer and retailer located in Eugene, Oregon~~Crypto. In integrating Thinking Tree Spirits into our existing operations, we plan to continue to produce the best-performing products in its portfolio while working to expand its wholesale reach. We also plan to combine the Thinking com

Crypto.com refers to the digital asset platform and related businesses operated by Crypto.com (including Foris DAX Asia Pte. Ltd., a Singapore-based private company and its affiliates), which provide cryptocurrency trading, brokerage, payment, and related services to retail and institutional clients worldwide. Founded in 2016, Crypto.com serves millions of users on its exchange and financial services products and operates in multiple jurisdictions subject to varying regulatory requirements.

Custody and Regulatory Framework. Crypto.com provides institutional digital asset custody services through its affiliated trust company, Crypto.com Custody Trust Company, a trust entity chartered under the laws of the State of New Hampshire and regulated as a qualified custodian by the New Hampshire Banking Department. This trust company currently holds and administers digital assets on behalf of eligible institutional clients and high-net-worth clients in the United States and Canada.

In October 2025, Crypto.com filed an application with the U.S. Office of the Comptroller of the Currency (“OCC”) to obtain a National Trust Bank Charter, which would, if granted, allow it to operate as a federally-regulated trust bank specializing in fiduciary, custodial and related services for digital assets under a unified federal banking framework.

Our Custody Arrangement with Crypto.com. On November 8, 2025, we entered into a Custodial Services Agreement with Crypto.com to hold our digital currency (the “Crypto.com Agreement”). The term of the Crypto.com Agreement is for one year with successive one-year renewals unless prior notice of non-renewal is given by either party. We pay Crypto.com a monthly digital asset storage fee based upon the market value of the assets in storage. Our custody agreement with Crypto.com is terminable by us or Crypto.com on 30 days’ notice as a result of a breach of the Crypto.com Agreement or upon 60 days’ notice by either party for any reason, and may be suspended by Crypto.com if we breach the terms of use or services or in response to legal or regulatory requirements. Crypto.com reported that it maintains a $320,000,000 insurance policy against loss, theft and misuse.

Table of Contents

~~Tree~~Overview Spirits production facilities and tasting rooms with our production facilities and retail tasting rooms in Eugene to create a larger consumer experience while driving more high-margin revenue activity. We believe that with our broader sales reach and our more efficient production capabilities, we can generate revenue from this acquisition that exceed the annual revenues that we were generating from the products that were produced under our low-margin, third-party production contract we terminated on January 31, 2024. We believe the third-party production contract we terminated was not capable of increasing in value for us, was limiting the amount of profit we could generate from the products produced and created potential risk exposure from the number of employees involved in the operation. We believe the Thinking Tree Spirits acquisition will increase growth in the brands we continue to produce and sell, which could increase the value of those brands based on valuations multiples in the spirits industry. For example, Thinking Tree Spirit’s Butterfly Pea Lavender Vodka was named Vodka of the Year for 2023 by Wine and Spirits Magazine, making it one of the most premium products in the industry. We believe the addition of that product to our existing portfolio will strengthen the perception of our product offerings in the marketplace and help us grow our wholesale and retail revenues.Kraken

InKraken ~~2017,~~is ~~we created and launched Flavored Bourbon,~~ a ~~bourbon~~global ~~flavored~~digital ~~with~~asset ~~brown~~platform ~~sugar~~operated ~~and cinnamon. It quickly grew into one of the fastest-growing flavored whiskeys in the Pacific Northwest and was named “World’s Best Flavored Whiskey” in 2018 and 2019~~ by ~~Whiskey Magazine in London. In 2020, we sold~~ a ~~majority interest in the brand to an industry~~ group ~~and retained a significant minority position. We have an economic right to participate in any ultimate sales proceeds~~ of ~~any~~affiliated ~~sale~~entities orunder ~~other disposition of substantially all of~~ the ~~purchaser’s~~“Kraken” ~~business or assets (for example~~brand, ifincluding ~~the brand is sold~~Payward, ~~or if distributions or revenue shares from brand profits are generated)~~Inc. ~~Following~~and onits ~~the~~subsidiaries, ~~success~~which ofprovide ~~the~~digital ~~Flavored~~asset ~~Bourbon brand~~trading, ~~and after examining the market~~brokerage, ~~we created Cocoa Bomb chocolate whiskey~~staking, aand ~~premium~~related ~~flavored~~services ~~whiskey~~to ~~that~~retail ~~was tested in a limited distribution in the Pacific Northwest in 2022~~ and ~~first~~institutional ~~rolled~~clients ~~out for wholesale expansion~~ in ~~2023~~multiple jurisdictions. InKraken ~~February~~is ~~2025,~~not ~~Cocoa~~a ~~Bomb~~public ~~was recognized as the “Best Flavored Whiskey in the United States” by Whiskey Magazine~~company, and ~~was~~its ~~then~~operations ~~named~~are ~~“World’s~~subject ~~Best~~to ~~Flavored~~evolving ~~Whiskey”~~regulatory atframeworks ~~Whiskey Magazine’s global competition~~ in ~~March 2025. This was~~ the ~~third time we have one these prestigious awards in the flavored whiskey category for the~~ United States and ~~globally~~internationally.

~~While~~Kraken weCustody were producing the whiskey products described above, we were aging additional whiskey with the goal of creating bottles of single-barrel selections with specific flavor profiles to appeal to the growing “bourbon hunter” demographic — a subset of whiskey drinkers who seek out small batch and ~~unique~~Banking ~~high-quality whiskeys~~Services. Institutional ~~Unlike~~digital ~~many~~asset ~~new~~custody ~~brands~~services ~~entering~~are ~~the~~offered ~~premium~~through ~~craft~~Kraken ~~whiskey~~Financial, ~~and bourbon category that rely on sourced liquid for all or~~ a ~~portion of their blends, we produce and age all of our products in~~Wyoming-~~house~~chartered ~~for~~Special ~~our~~Purpose ~~Stiefel’s~~Depository ~~Select~~Institution ~~line.~~(“SPDI”) ~~This~~bank ~~allows~~operated usby toPayward leverage our experience and our innovative distillation methods while taking advantage of the Pacific Northwest’s unique climate to produce aged whiskeys that are authentic to our name and of the highest quality. Depending on the particular productFinancial, ~~ingredients are blends of corn, rye, malted barley, unmalted barley, peated malt and wheat~~Inc. ~~Once~~d/b/a ~~aged~~Kraken ~~in heavy-charred American Oak barrels, the finished product is bottled at 94 to 100 proof~~Financial. ~~Future~~Kraken ~~releases~~Financial ~~could also include barrel-strength releases to be priced at the high end of the super-premium range. Each barrel~~ is ~~bottled,~~a ~~hand labeled, and hand numbered with sequentially~~state-~~numbered~~regulated ~~bottles.~~bank ~~All~~authorized ~~whiskeys~~ under ~~this~~Wyoming ~~brand~~law ~~are aged at least four years and are selected based on stringent tasting protocols we developed. Aged whiskeys are priced at super-premium prices and are frequently supply-constrained due~~ to ~~market~~provide ~~demand~~digital ~~and~~asset ~~the~~custody ~~time~~services ~~required to produce these products. As of December 31, 2024, we had 1,543 barrels of aged spirits in our warehouse that we are aging for ourselves~~ and ~~others. The prices at which we sell a barrel ranges from a low of $5,500 when product is bottled for sale through the wholesale channel~~ to aact ~~high~~as ~~of approximately $20,000 or more if the contents are sold by the bottle through our own retail channels. Since the launch of Stiefel’s Select, we have already been awarded~~ a ~~Double~~qualified ~~Gold~~custodian ~~Medal, Gold Medal and Best of Category~~ for ~~our~~certain ~~first~~institutional ~~releases by some of the most prestigious spirits competitions in the world~~clients.

InKraken ~~keeping~~Financial ~~with consumer trends, we also developed a line of super premium spirits-based RTDs in 12-ounce cans for on-the-go consumers. The RTD segment~~ is ~~among~~distinct ~~the~~from ~~fastest-growing~~Kraken’s ~~segments~~exchange ~~of the alcoholic beverage market in the U.S.,~~ and ~~our~~trading ~~line of award-winning RTDs began to gain wholesale momentum in the Pacific Northwest in late 2022. These products come in four flavors: Peachy Bourbon~~platforms, Gin Jam Fizzzz, Easy Peasy Lemon Squeezy and Blood Orange Vodkarita. Each recipe features a burst of flavors, low carbonation and a low 6.9% ABV (alcohol by volume). In a recent survey of 993 customers in our tasting rooms, 70% replied they would purchase our RTD products at a retailer, with the largest group of responders to the survey in the 26-45 age demographic. All four products have won awards from respected tasting competitions, including Peachy Bourbon, which ~~was~~are ~~named~~operated ~~best overall RTD among all RTD products~~ by ~~the~~separate ~~Seattle~~affiliates ~~Cocktail Club, a collection of the top bartenders~~ and industry insiders in the region. In May 2023, all four RTDs ran the table at the International SIP judging with 3 Gold Medals, a Double Gold Medal, two Consumer Choice Awards and an Innovation Award. In the U.S., RTDs are ~~projected~~not ~~by Grand View Research to reach $2~~banks.4 ~~billion~~Client inassets ~~revenue~~custodied by ~~2030~~Kraken ~~with~~Financial ~~a 13% CAGR from 2020 to 2030. Consumers~~ are ~~increasingly~~held ~~favoring~~in ~~RTDs~~segregated ~~because~~accounts ~~of their convenience, consistent flavor profiles~~ and ~~lower~~are ~~alcohol~~not ~~content,~~insured ~~which~~by ~~we believe helps to position~~ the ~~products~~Federal inDeposit ~~the~~Insurance ~~growing~~Corporation (“~~better for you~~FDIC”) ~~segment~~or of the ~~adult~~Securities ~~beverages~~Investor ~~market~~Protection Corporation (“SIPC”).

Our Custody Agreement with Kraken. On December 18, 2025, we entered into a Custodial Services Agreement with Kraken to hold a percentage of our digital currency (the “Kraken Agreement”). The term of the Kraken Agreement is for one year with successive one-year renewals unless prior notice of non-renewal is given by either party. We pay Kraken a monthly digital asset storage fee based upon the market value of the assets in storage, with no minimum monthly fee. The Kraken Agreement is terminable by either us or Kraken on 30 days’ notice as a result of a breach of the Kraken Agreement and may be suspended by Kraken if we violate the intended use of the account, if we breach the terms of use or services or in response to legal or regulatory requirements. Kraken reported that it maintains a $100,000,000 policy against loss, theft and misuse.

Overview of BitGo

BitGo refers to the digital asset infrastructure and financial services business operated by BitGo Holdings, Inc., a Delaware corporation headquartered in Palo Alto, California. BitGo provides institutional digital asset custody, settlement, staking, wallet services, and related infrastructure to institutional clients globally.

Custody and Banking Services. Institutional custody and regulated digital asset services are offered through BitGo Bank & Trust, National Association (“BitGo Bank & Trust”), a national trust bank chartered and regulated by the OCC. BitGo Bank & Trust is a wholly-owned subsidiary of BitGo Holdings, Inc. and operates under a federal bank charter that authorizes it to provide custody and safekeeping of digital assets and certain non-deposit financial assets under applicable federal fiduciary and non-fiduciary authorities.

BitGo Bank & Trust’s national charter permits the firm to offer regulated digital asset custody services across the United States under a uniform federal supervisory regime, reducing the need for state-by-state licensing and enhancing regulatory clarity for institutional clients. Activity is subject to federal governance, capital, compliance, and risk-management standards applicable to national trust banks.

Our Custody Agreement with BitGo.com. On December 5, 2025, we entered into a Custodial Services Agreement with BitGo to hold our digital currency (the “BitGo Agreement). The term of the BitGo Agreement is for three years with successive one-year renewals unless prior notice of non-renewal is given by either party. We pay BitGo a monthly digital asset storage fee based upon the market value of the assets in storage with a minimum monthly fee of $100. The BitGo Agreement is terminable by either us or BitGo on 30 days’ notice as a result of a breach of the BitGo Agreement and may be suspended by BitGo if we violate the intended use of the account or due to a change in the applicable law, litigation or bankruptcy. BitGo maintains a $250,000,000 insurance policy against loss, theft and misuse.

Custodied Storage of Our Digital Assets

Our custodians are responsible for safekeeping all of the $IP Tokens held by them that are not otherwise staked on our validators. We are moving toward having our $IP Tokens held at multiple custodians to reduce the risk of a single failure and we will continue to review further diversification with additional custodians as our Treasury grows. The custodian accounts are all opened by us, segregating our assets into an individual custodian account owned by us. Access is monitored and controlled by us using established controls to ensure transactions require consensus of a minimum of two individuals when assets are being transferred between wallets or onto a validator. The assets go through our custodians’ trust companies, which are regulated federally or by the state in which the trust company is organized or incorporated.

Private keys are generated by the custodian in key generation ceremonies at secure locations using offline devices that have never been connected to a network. Private keys are generated according to detailed procedures using specialized

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Weoffline ~~also~~devices ~~feature~~and awithin ~~series~~these secure facilities to mitigate risk of ~~gins~~hacks, ~~rums~~errors ~~and~~or ~~limited-edition~~other ~~products~~unintended external exposure. Key ceremony processes are highly controlled, ~~primarily~~require insegregation ~~our~~of ~~tasting~~duties ~~rooms~~across asmultiple weparties ~~examine~~and ~~which~~are ~~products~~reviewed ~~perform~~and ~~well~~witnessed ~~enough~~by todesignated ~~try~~oversight personnel. Thorough validations and signoffs are performed to ~~push~~verify ~~into~~the ~~broader~~integrity ~~distribution~~and security of key generation ceremonies.

~~Distribution~~Intellectual ~~and~~Property ~~Sales~~on the Story Network

WeLike ~~utilize~~some another ~~omni-channel~~blockchain ~~approach~~networks ~~for~~such as Ethereum and Solana, the ~~distribution~~Story Network supports the deployment of ~~our~~smart ~~products~~contracts, ~~which~~that ~~includes~~is, ~~sales~~programmatic ~~through~~code ~~our~~that executes on every computer in the network and can instruct the transmission of information and value based on a sophisticated set of logical conditions. However, while networks such as Ethereum and Solana support general-~~branded~~purpose ~~distilleries~~smart contracts, the Story Network is expressly designed for intellectual property content-centric use cases, with a protocol architecture optimized for representing ownership, permissions and ~~tasting~~usage ~~rooms;~~rights ~~wholesale~~associated ~~through~~with ~~distributors~~digital works. These contracts can encode license terms, manage royalty flows, register authorship claims or facilitate composability among digital assets (e.g., songs sampled in a remix or images used in a larger work). This allows for a wide range of creative, legal and commercial relationships to ~~retailers~~be modeled and automated on-~~premises~~chain. ~~accounts~~For example, ~~such~~an asartist ~~bars~~uploading ~~and~~a ~~restaurants;~~music ~~DtC~~track ~~online~~to ~~sales;~~the ~~sales~~Story ~~through~~protocol ~~state~~could ~~control~~use ~~systems;~~a smart contract to automatically register the song’s metadata, set licensing permissions for remixes, and ~~sales~~specify ~~through~~that derivative works must automatically send a portion of their revenue back to the ~~TBN~~original creator via on-chain settlement. This creates an environment that is intended to facilitate developers and creators creating decentralized applications (“DApps”) catering to creative industries.

~~This~~Development ~~approach~~of ~~includes~~technology ~~five~~on ~~company-owned~~the ~~and~~Story ~~Heritage-branded~~Network ~~tasting~~that ~~rooms,~~can ~~two~~further ofthese ~~which~~intended ~~are~~outcomes ~~attached~~includes totools ~~our~~for ~~distilleries~~registering ~~in Washington~~ and ~~Oregon.~~timestamping Weoriginal ~~are~~works, ~~also~~minting innon-fungible ~~the~~tokens ~~process~~that ofrepresent ~~licensing~~licensed ~~out~~intellectual ~~our~~property ~~brand,~~with ~~products~~attached ~~and~~usage ~~programs~~terms, ~~under~~creating ~~our~~composable ~~TBN~~derivative ~~model~~assets towith ~~several~~traceable ~~tribes~~lineage, ~~for~~and ~~HDC~~facilitating ~~branded~~decentralized ~~tasting~~creator ~~room~~groups ~~facilities in or next~~ to ~~their~~manage ~~casino~~collective ~~operations.~~rights ~~More~~and ~~information~~royalty ~~on our TBN effort is detailed in the next section~~structures.

AsWhile ~~part~~the ofStory ~~our~~Network ~~innovation~~explores ~~cycle,~~on-chain weintellectual ~~utilize~~property ~~our~~registration ~~owned distilleries~~ and ~~tasting~~enforcement, ~~rooms~~it inis ~~the~~important ~~Pacific Northwest and partner tasting rooms~~ to ~~test~~acknowledge ~~products~~it ~~and~~is ~~trial~~still ~~and~~experimental ~~sell~~in ~~directly to consumers~~nature. InThe ~~our~~legal ~~tasting~~status ~~rooms,~~of ~~consumers~~assets ~~can~~registered ~~try~~on ~~new~~the ~~products~~network ashas ~~well~~not asbeen ~~the~~tested ~~mainstay~~ or ~~limited-production~~recognized ~~branded~~by ~~spirits~~courts ~~and~~or ~~cocktails~~regulatory ~~while~~bodies ~~they~~in ~~experience~~any ~~the~~jurisdiction. ~~excitement~~For ofexample, ~~drinking~~registration inof aauthorship ~~differentiated~~on ~~environment.~~the WeStory ~~have~~Network ~~developed~~has anot ~~strong~~been ~~membership~~recognized ~~base~~to ~~across~~constitute ~~our~~registration ~~facilities~~ with ~~over~~the ~~2,500~~U.S. ~~active~~Copyright ~~members,~~Office ~~many~~or ofconfer ~~whom~~the ~~participate~~statutory inbenefits ~~our~~associated ~~surveys~~with onsuch ~~trends~~filings. ~~and~~Likewise, ~~taste~~while ~~preferences.~~smart ~~These~~contracts ~~members~~may ~~are~~automate ~~either~~licensing ~~part~~or ofroyalty ~~our~~flows ~~Cask~~among ~~Club~~participants, ~~which~~their ~~allows~~enforceability ~~them~~under totraditional ~~develop~~contract ~~custom~~law ~~products~~remains ~~selected~~uncertain. ~~from~~As a ~~list~~result, ofthe ~~pre-approved~~protocol’s ~~recipes~~intellectual inproperty ~~our~~protections ~~portfolio~~currently ~~and~~operate toas ~~age~~private ~~them~~ordering inmechanisms ~~their~~within ~~own~~the ~~10-liter casks in our facility~~network, orrather ~~they~~than ~~are~~as ~~members~~legally-binding ofinstruments ~~our~~recognized ~~Spirits~~by ~~Club,~~national ~~receiving~~or ~~regular~~international ~~shipments~~intellectual ofproperty ~~spirits throughout the year~~regimes.

WeAs ~~also rely upon, and intend to increasingly grow, the wholesale distribution~~ of ~~our~~March ~~products.~~31 ~~SGWS~~2026, ~~the~~more ~~leading~~than ~~U.S.~~50 ~~spirits~~DApps ~~distributor~~have ~~with~~been andeployed ~~approximately~~to ~~34.6% market share across~~ the ~~U.S.~~Story ~~in 2021~~Network, ~~distributes~~spanning ~~our~~categories ~~original~~such ~~mainstream~~as ~~products~~digital ~~in Washington~~publishing, ~~Oregon~~music ~~and~~rights ~~Alaska. In July 2021~~management, wecreative ~~began~~royalty a distribution ~~arrangement~~and ~~with~~collectible ~~RNDC, the second largest U~~media.S. ~~spirits~~While ~~distributor~~other ~~with~~blockchains anhave ~~approximate~~supported ~~20.3%~~similar ~~market~~use ~~share in 2021~~cases, ~~covering 39 of~~ the 50Story ~~states~~Network inaims the U.S. plus Canada. In the second quarter of 2024, we launched wholesale distribution in Oklahoma through the MillerCoors beer network and added distribution in the third quarter of 2024 in Kansas, Kentucky and portions of Colorado. We supplement the work of our distributors with a direct sales force of individuals assigned to ~~specific~~provide sales territories. These individuals manage the relationships with the applicable distributor’s sales teams, who themselves have teams of varying sizes selling products to accounts. This team works directly with retailers and onfirst-~~premises~~class ~~operators to build demand and~~ support ~~their needs~~ for ~~marketing and other Heritage~~rights-~~specific~~based ~~information.~~digital ~~During 2024~~assets, weincluding ~~sold~~digital torights ~~distributors~~transactional inrecording ~~the~~and ~~wholesale~~dispute ~~channel approximately 20~~resolution,~~221~~ ~~cases~~reducing oflegal product, a decrease of approximately 13.2% compared to the 23,298 cases we sold on a wholesale basis in 2023, while seeing a nominal decrease in our wholesale revenue of approximately $62,000 during 2024 to approximately $1,596,000 compared to wholesale revenue of approximately $1,658,000 in 2023, an decrease of approximately 3.7%. The reduced volume of cases through our wholesale channel with a much smaller percentage decrease in revenue is proof that our strategy of migrating away from lower-margin spirits to higher margin spirits is working. We expect to see a significant increase in our wholesale revenues in 2025 and ~~beyond,~~technical ~~and~~overhead anfor ~~increase in margins as we focus on putting higher margin products into the wholesale channel~~creators.

AsInitial ~~for~~Creation ~~our DtC channel, we have started to utilize new technologies and collaborations with the goal~~ of ~~reaching~~$IP ~~consumers~~Tokens ~~in more than 46 states in 2024. This direct-to-consumer opportunity allows us to sell products to consumers in more states~~ and ~~enables~~$IP ~~the~~Tokens ~~collection of consumer data and supports growth in product demand, which helps our distributors sell branded products in more states.~~Supply

~~Tribal~~Unlike ~~Beverage~~other digital assets such as Bitcoin, which are solely created through a progressive mining process, one billion $IP Tokens were initially created in connection with the launch of the Story Network. Of those tokens, approximately 75% were issued, subject to lockup agreements, at initial creation. The protocol is designed to release a number of additional $IP Tokens per year as validator rewards, which is subject to change based on utilization of the network. The supply of $IP Tokens is also reduced when the base fee for transactions is burned. A net of approximately 25.5 million $IP Tokens have been created and released by the protocol for validator rewards (~~TBN~~net of $IP Tokens burned) since its inception. Additionally, certain actions by validators and delegators require one $IP Token to be burned.

InThe addition to our traditional distribution channels, we have formed the TBN, which we believe will become an important production, sales and marketing channel over time, while helping to build our overall brand. This network was formed in collaboration with Native American tribes interested in entering a new business line that became available to them for the first time in 2018. In 2018, Justin Stiefel, our Coinitially-~~Founder,~~created ~~Chairman~~one ~~and~~billion ~~Chief~~$IP ~~Executive~~Tokens ~~Officer,~~were ~~worked~~allocated to lobby the U.S. Congress to pass legislation that overturned a 184-year federal law prohibiting spirits production on tribal lands. As a result of this landmark legislation, Native American tribes have a new economic opportunity and we are working with several Native American tribes on the development of our branded distilleries and tasting rooms, as ~~well as the sale of our products and the creation of brands unique to participating tribes.~~follows:

~~Today,~~Ecosystem ~~Native~~and ~~American~~Community: ~~tribes~~approximately ~~that~~384 ~~sell~~million ~~spirits~~$IP ~~to visitors at their casinos~~Tokens, ~~restaurants,~~or ~~golf~~38.4% ~~courses,~~of ~~hotels, resorts and shops are~~ the ~~largest~~initial ~~sales accounts for spirits~~supply, ~~wine~~was ~~and~~allocated ~~beer~~towards inpromoting ~~each~~ecosystem ~~county~~growth inand ~~which~~community ~~they~~development ~~are~~by ~~present.~~supporting ~~Accordingly~~developers, wecommunity ~~believe~~members, ~~the~~and ~~potential~~users ~~revenue~~of ~~for~~the ~~participating~~Story ~~Native~~Network ~~American~~across ~~tribes~~product isdevelopment, ~~significant.~~education, ~~As of December 31~~events, ~~2024~~grants, ~~there~~service ~~were~~providers ~~approximately~~and ~~245~~other ~~Native American tribes in the U~~activities.~~S. with 527 tribal casinos in 29 states that generated annual revenues of~~

Initial Incentives: 100 million $IP Tokens, or 10% of the initial supply, was allocated to be disbursed as rewards to incentivize the growth of the Story ecosystem, across multiple seasons.

Story Foundation: 100 million $IP Tokens, or 10% of the initial supply, was allocated to Story Foundation to support its team, educational services, product development and educational efforts related to the Story Network.

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Early Backers: approximately ~~$32~~216 ~~billion.~~million ~~Not~~$IP ~~all tribes own casinos and several do not permit the sale of alcohol on their tribal lands. Each tribal casino that serves alcoholic beverages is the largest beer~~Tokens, ~~wine and spirits account in the county~~ or ~~state in which they are located~~21.6% Ofof the ~~527~~initial ~~tribal casinos~~supply, wewas ~~estimate~~retained ~~that~~by ~~approximately~~investors ~~250 are viable candidates for our TBN model. We calculate that with 100 TBN production and retail locations up and running~~ in ~~or near tribal casinos and entertainment districts,~~ the ~~participating~~initial ~~tribes~~development ~~collectively~~project ~~can~~to ~~earn~~compensate ~~revenue~~for ~~from spirits sales and taxes on the products produced on~~ their ~~lands~~early ~~$350~~efforts ~~million~~in ~~to $450 million per year, and that we could earn royalties of approximately $35 million to $45 million annually from these activities based on~~ the ~~value~~development ~~we bring to the relationships and operations. We believe the combination~~ of ~~growing TBN locations with more consumer exposure to our brand and products and~~ the ~~resulting~~Story ~~product adoption within each region will support wholesale product sales with a positive feedback loop for our wholesale growth initiatives~~Network.

~~Using~~Core aContributors: 200 ~~“distributive~~million ~~and~~$IP ~~localized” network model~~Tokens, we expect to collaborate with tribes to lead the development of a nationwide tribal network for the production and sale of premium, branded craft spirits. The network is comprised of tribally-owned, localized distilleries with a centralized high-volume distributive distillery serving a specific area or ~~region~~20% of the ~~United~~initial ~~States. Initial spirits production will occur at a single facility with additional distilleries receiving bulk spirits for final production and sale. By using this approach to production~~supply, ~~each~~was ~~localized~~allocated ~~distillery is expected~~ to be ~~able~~used toas ~~produce~~compensation ~~finished~~for ~~spirits~~team ~~through~~members ~~bottling,~~contributing ~~canning~~to ~~and~~the ~~labeling~~development ~~without~~of the ~~need~~Story ~~for excess distilling equipment and unused capacity~~protocol.

WeThe ~~generally~~tokens ~~seek~~in tothe ~~negotiate~~Ecosystem ~~multi-year~~and ~~contracts with tribes of up to nine years~~Community, ~~plus~~Story ~~extensions~~Foundation, ~~and~~Early toBackers ~~charge a mix of advisory fees~~ and ~~royalties.~~Core InContributors ~~exchange~~allocations ~~for~~were ~~these~~subject ~~fees, we provide services relating~~ to economic analysis, location design, pre-opening hiring and training, marketing support, centralized marketing development, raw input sourcing, bulk buying power for direct inputs such as glass, labels, caps, merchandise, new product development, monthly reporting, compliance and back-office support, halo marketing, staff training and new product development. Upon the commencement of a ~~contract,~~staged ~~we charge development fees associated with analysis, pre~~lock-~~design,~~up ~~design~~release ~~and pre-opening service for advising the tribe on the development~~ of ~~distilleries,~~up ~~tasting rooms and brands, and then charge a royalty on gross revenue once the distillery is operating. As part of the agreement, the applicable tribe is expected~~ to ~~produce~~4 ~~and sell our branded products~~years, ~~and we are expected to work jointly~~ with ~~the~~monthly ~~tribe on products and brands unique to the tribe and its locations and regions~~unlocks. WeThe ~~believe~~tokens ~~this~~in ~~is a significant new business opportunity for tribes with~~ the ~~potential~~Early ~~for~~Backers ~~strong revenue~~ and ~~profit~~Core ~~growth,~~Contributors ~~allowing~~categories ~~tribes~~had toan ~~capture~~initial ~~the~~partial ~~full~~release ~~margin~~starting ~~benefit~~12 asmonths ~~manufacturers~~after ~~and~~ the ~~ability~~token tolaunch collect and keep state spirits taxes for products made and sold on their sovereign land. We have already entered into agreements with multiple tribes, including agreements for a new Heritage Distilling branded tasting room that opened at the Stillaguamish Tribe’s Angel of the Winds casino north of Seattle, Washington in ~~October~~February ~~2024~~2025, ~~the~~which ~~ongoing~~has ~~construction~~since ofbeen aextended ~~Heritage Distilling-branded tasting room at the Tonto Apache Tribe’s Mazatzal Casino in Arizona, which is anticipated~~ to ~~open~~18 inmonths. ~~late~~The ~~2025,~~current ~~and~~circulating asupply ~~landmark agreement between the Coquille Tribe~~ of ~~Oregon~~unlocked ~~and~~tokens ~~the Oregon Liquor Control Board to allow for the first tribal distillery in Oregon. A Heritage Distilling-branded tasting room~~ is ~~under~~approximately ~~construction~~352 ~~and~~million ~~scheduled to open in late 2025 at Coquille’s Mill Casino Hotel & RV Park on the water in Coos Bay~~tokens, ~~Oregon.~~which ~~This~~includes is the ~~first~~unlocked ~~such~~portion ~~agreement between a Native American tribe and one~~ of the 18initial ~~liquor~~supply ~~control~~plus ~~states~~staking inrewards ~~the United States and~~ that ~~project~~have isbeen ~~under~~generated ~~construction~~since ~~with~~February ~~a targeted opening in late~~ 2025.

~~Pursuant~~Modifications to ~~our multi-year agreement with~~ the ~~tribes,~~Story we license portions of our intellectual property, including our brands, recipes, awards and programs, to the tribe for use at their branded facility. We also assist the tribe with new product development, marketing, distribution, and tasting room operations, and Cask Club operations. We also provide training, expertise and experience in the design, construction and operation of the tribe’s distillery. We earn a monthly management fee from the tribe based on the monthly revenue of the tribe’s distillery, and receive a portion of the revenue earned by the tribe, in each case, for retail operations related to distilled spirits sales and services on site and based on additional production we bring to the facility. The parties can terminate the agreement under certain circumstances, including upon certain events of default, including a material breach of the agreement, failure to achieve profitability after five years, changes in federal or state laws related to alcohol, and a change of control of our company, among other limited events. We intend to enter into similar agreements with other Native American tribes going forward.Network

WeThe ~~believe~~Story ~~that~~Network ~~membership~~is inopen-source ~~the~~and ~~TBN~~community-governed. ~~provides~~Its ~~extensive~~development ~~benefits~~is tooverseen ~~participating~~by ~~U.S.~~Story ~~tribes,~~Foundation ~~whether~~and asupported ~~tribe~~by ~~owns~~core developers and ~~operates~~independent acontributors. ~~distributive~~These ~~facility~~stakeholders orcan apropose ~~localized~~protocol ~~distillery within the network~~upgrades, ~~including~~but ~~profit~~adoption ~~margins~~requires ~~that~~widespread ~~are~~acceptance ~~estimated~~among tovalidators ~~equal or exceed 80% on retail activities before fees are charged. Tribes also enjoy unique benefits related to property~~ and ~~sales~~users, ~~taxes~~consistent ~~associated~~ with ~~the~~decentralized ~~production~~governance ~~and sale of spirits on tribal trust land, including:~~norms.

~~•Tribes~~The ~~keep~~release ~~state~~of ~~and~~updates ~~local~~to ~~liquor~~the ~~taxes~~Story onNetwork’s source code does not guarantee that the ~~sale~~updates will be automatically adopted. As with other blockchain protocols, proposed upgrades are implemented only if a critical mass of ~~spirits~~validators ~~they~~and ~~produce~~participants update their software. Users and ~~sell~~nodes must accept any changes made to ~~consumers~~the onStory ~~their~~source ~~lands~~code by downloading a software implementation of the proposed modification. A modification of the Story Network’s source code is only effective with respect to the Story Network users that download it. If a modification is accepted only by a percentage of users and validators, ~~which~~a ~~allows~~division ~~tribes~~in the Story Network may occur such that one network will run the pre-modification source code and the other network will run the modified source code. Such a division is known as a “fork.” Consequently, as a practical matter, a modification to ~~generate~~the ~~strong~~source ~~profitability~~code becomes part of the Story Network only if accepted by participants collectively having at least a consensus of the processing power on the Story Network as defined by the protocol.

The Story Foundation approved in late January 2026 and announced publicly on February 2, 2026 a set of governance changes aimed at strengthening the long-term health of the Story Layer 1 blockchain. These updates adjusted staking mechanics and emissions by reducing rewards tied to locked tokens and lowering staking thresholds and fees. The intent of these changes was to better align incentives toward active participants, improve economic sustainability, and support the continued development of Story’s IP-centric and AI-driven use cases.

On February 2, 2026, the Story Foundation also announced changes to the $IP Token unlock schedule pursuant to which the next scheduled unlock of certain locked $IP Tokens held by team members, investors and insiders was delayed by approximately six months and moved to August 13, 2026. These changes did not affect the total supply, allocations or ownership rights of such $IP Tokens, but they slowed the near-term token issuances to reduce market pressure and support a more stable token economy as the network grows.

Recent development efforts have focused on enhancing scalability, content traceability and intellectual property licensing tools to support a broader ecosystem of creative rights management tools.

$IP Token Value

The value of $IP Tokens is determined by the value that various market participants place on $IP Tokens through their transactions. The most common means of determining the value of an $IP Token is by surveying one or more digital asset trading platforms on which $IP Tokens are traded publicly and transparently (e.g., Coinbase, Binance, Bybit, Upbit, etc.). Additionally, there may be over-the-counter dealers or market makers that transact in $IP Tokens. According to Coinbase.com, as of December 31, 2025, the total market capitalization of the current circulating supply of $IP Tokens was $589.0 million. From February 13, 2025 (the date $IP Tokens first became available on digital asset trading platforms) through March 31, 2026, the price of $IP Tokens, as reported by Coinbase.com, ranged from a low of $0.516 to a high of $14.908.

Digital Asset Trading Platform Public Market Data

On each online digital asset trading platform, $IP Tokens are traded with publicly-disclosed valuations for each executed trade, measured by one or more fiat currencies such as the U.S. dollar or the euro or by the widely-used cryptocurrencies, Bitcoin and Ethereum. Over-the-counter dealers or market makers do not typically publicly disclose their trade data.

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~~•Tribal~~Craft land is sovereign land, so tribes control their own zoning and permitting, which enables them to substantially reduce the time and expense required to begin construction as compared to building on non-tribal land.Spirits

~~•Tribes~~Our ~~pay~~craft nospirits ~~sales~~segment ~~tax~~includes onthe ~~purchases~~production, marketing, licensing, and sale of ~~equipment~~a ordiverse ~~construction~~line of ~~distilleries~~award-winning craft super-premium whiskeys and ~~tasting~~premium-flavored ~~rooms~~whiskeys, ~~which~~under ~~lowers~~our ~~start-up~~owned ~~costs~~and aslicensed ~~compared~~brands, with a focus on wholesale distribution, DtC sales, and the expansion of our Tribal Beverage Network (TBN) through licensing and royalty arrangements. For a decade we received the most craft distiller awards from the American Distilling Institute than any other craft distiller in North America, in addition to ~~non-tribal~~receiving ~~locations~~numerous Best of Class, Double Gold, and Gold medals in a broad range of national and international competitions. While we compete with more than 3,000 active craft distilleries in the United States, we believe we are differentiated from our competitors by scale, award recognition, innovation, and distribution strategy.

~~•Tribes~~At ~~also~~the ~~pay~~end noof ~~state~~2025, orin ~~county~~an ~~property~~effort ~~tax,~~to ~~inventory~~reduce ~~tax,~~the ~~personal~~costs ~~property~~and ~~tax~~increase orthe adoperating ~~valorem~~margins ~~tax~~of this operating segment, ~~which~~we ~~lowers~~made ~~their~~the ~~overall~~decision ~~cost~~to transition to an asset light strategy whereby we began to reduce the number and types of ~~operations~~spirits ~~compared~~products we offer and emphasize margin expansion through premium and super-premium products, affinity-driven branding, and diversified go-to-market ~~operations~~channels ~~set~~that upreduce ~~outside~~our reliance on high-touch point-of-sale ~~the~~retail ~~tribal~~operations ~~land~~and shelf-space-constrained wholesale distribution alone.

InBrand ~~addition~~Portfolio ~~to the revenue generated by spirits produced on-site, we plan to create a member-based rebate for each tribe participating in the TBN based upon the production~~ and ~~sale~~Product of products on tribal lands and the overall growth of the brands produced on tribal lands and benefitting from marketing support at tribal casinos and entertainment districts. We believe this rebate will encourage more tribes to enter the TBN and will enable participating tribes to share in the overall growth. In addition, by aligning with our nationwide branding and marketing efforts, TBN member tribes will receive support for the promotion of their own spirits production and associated events and activities. We believe that tribes that choose to locate a TBN distillery and our branded tasting room on, in or near a gaming and hospitality property will find the refined presentation of our locations adds a sophisticated, appealing experience to a dynamic space. The addition of this new customer amenity to a casino resort can highlight certain programs, thereby driving customer loyalty and repeat visits, while increasing margins through beverage sales via on-site restaurants and bars.Innovation

~~Under~~We ~~the~~offer ~~TBN~~a ~~model,~~diversified ~~the~~portfolio ~~participating tribes will fund the construction~~ of ~~their~~super-premium ~~own~~whiskeys ~~distilleries~~ and ~~production~~premium-flavored ~~and~~whiskey storage facilities and will pay all of the operating and labor expenses of those facilities while we provide support for the tribe’s operations, marketing, new product development and regulatory compliance functions. Heritage will provide ongoing tasting room support and training for the tribe’s employees to ensure consistency of operations, training and product and brand integrity. products:

~~Marketing~~•1st Special Forces Whiskey & Salute Series: In 2015, we launched 1st Special Forces Whiskey, a premium brand positioned towards active-duty military, retired military, military families, and others supportive of the armed forces in the Pacific Northwest, where the 1st Special Forces Group is stationed at Joint Base Lewis McChord. We have produced seven blends of Special Forces Whiskey annually since 2015, and a portion of the sales proceeds of this brand are donated by us to special forces charities annually. We are expanding this concept to the multiple Special Forces groups across the country with a greater emphasis on distribution in more states and direct to consumer shipping through our e-commerce platform. Our new Salute Series line of whiskeys consists of various bottlings branded for U.S. military branches and first responders. Since late 2023, the Salute Series has sold over 30,000 bottles, generating more than $2.0 million in revenue and approximately $2.8 million in retail brand value. Limited releases are priced between $95 and $145 per bottle.

WeThere ~~believe~~are weapproximately ~~have~~18.3 ~~developed~~million aactive-duty ~~successful~~military ~~sales~~ and ~~marketing~~retirees ~~approach~~in ~~with~~the ~~our~~U.S., ~~limited~~including ~~resources~~National Guard, Air National Guard and ~~anticipate~~reservists ~~that~~in ~~investing~~each ~~additional~~branch ~~resources~~of ~~will~~the bemilitary. anAssuming ~~important~~1.5 ~~element~~dependents inper ~~increasing~~person (a dependent is defined by the ~~visibility~~military as a spouse, child under 21 unmarried or under 23 if a student, parent or custodian dependent), the total population of ~~our~~active ~~brands~~military, retired military and ~~product~~dependent ~~offerings~~affiliated persons is 45.75 million people. There are another 660,000 active-duty civilian law enforcement officers, 1 million career and volunteer firefighters, more than 5 million registered nurses and more than 1 million certified EMTs, plus millions of retirees and affiliated family members. We believe the new Salute Series line will continue to ~~our~~garner ~~target~~a ~~consumers~~growing following given the specialty packaging and non-profit charitable partnerships we are forming to support ~~our~~the ~~ongoing~~launch ~~growth~~and sale of the line.

~~Omni-Channel~~•Flavored ~~Marketing~~Whiskey ~~Approach. Today’s~~Leadership: ~~consumers~~In ~~interact~~2017, ~~with~~we ~~brands~~created ~~through~~and ~~many~~launched ~~channels~~Flavored Bourbon, ~~from~~a ~~traditional~~bourbon ~~media~~flavored towith ~~social~~brown ~~media~~sugar and ~~other~~cinnamon. ~~digital~~It ~~channels,~~quickly grew into one of the fastest-growing flavored whiskeys in the Pacific Northwest and ~~through~~was ~~various~~named “World’s Best Flavored Whiskey” in~~-person~~ 2018 and ~~online~~2019 ~~purchasing~~by ~~methods~~Whiskey Magazine in London. ToIn ~~build~~2020, we sold a majority interest in the ~~visibility~~brand ofto ~~our~~an ~~brands~~industry group and ~~create~~retained a ~~grassroots~~significant ~~consumer~~minority ~~following~~position. toFollowing ~~support~~on ~~our~~the ~~distribution~~success ~~channels,~~of wethe ~~have~~Flavored ~~employed~~Bourbon abrand, ~~strategic~~and ~~multichannel~~after ~~marketing~~examining ~~approach~~the ~~that~~market, we ~~believe~~created ~~allows~~Cocoa ~~consumers~~Bomb tochocolate ~~engage~~whiskey, ~~with~~a ~~our~~premium ~~company~~flavored onwhiskey ~~their~~that ~~own~~was ~~terms~~tested ~~and~~in ~~permits~~a uslimited todistribution ~~expand~~in the Pacific Northwest in 2022 and ~~deepen~~first ~~recognition~~rolled out for ~~our~~wholesale ~~brands~~expansion in 2023. In ~~addition~~February to2025 ~~promotional~~and ~~activities~~2026, ~~our~~Cocoa ~~marketing~~Bomb ~~strategy~~was ~~utilizes~~recognized ~~data~~as ~~analytics,~~the ~~digital~~“Best ~~techniques~~Flavored Whiskey in the United States” by Whiskey Magazine, and ~~efficiency~~in ~~metrics~~March 2025, ~~across~~Cocoa aBomb ~~cross~~was ~~section~~also ofnamed ~~social~~“World’s ~~media,~~Best ~~lifestyle~~Flavored Whiskey” at Whiskey Magazine’s global competition. This was the fourth time we have won these prestigious awards in the flavored whiskey category for the United States and ~~brand~~the ~~influencer~~third ~~activities~~time globally.

~~Working~~•Stiefel’s ~~with~~Select ~~one~~Aged ofWhiskey: ~~our~~While ~~strategic advisors,~~ we ~~have~~were ~~developed~~producing ~~an area of focus on DtC sales channels. While still in its early development and testing phases,~~ the ~~concept~~whiskey ~~is to develop and streamline ways to get our~~ products ~~directly~~described ~~in front of consumers for trial~~above, ~~sampling~~we ~~and~~were ~~purchasing~~aging inadditional ~~our~~whiskey ~~branded tasting rooms, partner TBN tasting rooms, TBN-specific entertainment districts~~ with ~~pop-up~~the ~~shops,~~goal ~~trial,~~of ~~sampling,~~creating ~~and~~bottles ~~bottle~~of ~~sales, and future planned co~~single-~~located~~barrel ~~collaborative~~selections ~~tasting rooms in partnership~~ with ~~other~~specific ~~premium~~flavor ~~craft~~profiles ~~producers~~to ~~across~~appeal ~~the United States. The platform is built upon one-~~to~~-one~~ ~~marketing~~the ~~efforts~~growing ~~through~~“bourbon ~~digital,~~hunter” ~~social~~demographic ~~email~~— ~~and~~a ~~text~~subset ~~to drive consumer trial and adoption~~ of ~~products~~whiskey ~~and~~drinkers ~~brands.~~who Weseek ~~are~~out ~~also~~small ~~experimenting~~batch ~~with artificial intelligence (“AI”) to create dynamic content to better identify~~ and ~~connect~~unique ~~directly~~high-quality ~~with consumers in key target demographic for each product and brand~~whiskeys. ~~The~~Unlike ~~sales~~many ~~resulting~~new ~~from~~brands ~~such~~entering ~~efforts tends to be higher margin than~~ the ~~traditional~~premium ~~wholesale~~craft ~~route~~whiskey toand ~~market,~~bourbon ~~which~~category isthat ~~the~~rely ~~norm~~on insourced ~~the~~liquid ~~spirits~~for ~~industry right now. While~~ all ~~the~~or ~~other~~a ~~craft~~portion ~~brands~~of ~~fight~~their ~~for shelf space in an increasingly crowded marketplace bottle necked by more and more distributor consolidation~~blends, we ~~are~~produce ~~developing~~and aage ~~route~~all toof goour ~~straight~~products ~~to the consumer through multiple paths~~ in ~~a one~~-~~stop~~house ~~retail~~for ~~way~~our ~~that~~Stiefel’s ~~allows~~Select ~~us to control the dialog and the brand position and to collect the consumer data~~line. This ~~effort~~allows ~~has the combined positive attributes of allowing~~ us to ~~generate~~leverage ~~sales~~our atexperience ~~high margins, capture consumer data~~ and ~~contact~~our ~~information~~innovative ~~for~~distillation ~~future~~methods ~~sales~~while ~~targeting,~~taking ~~and~~advantage toof ~~build~~the ~~brand~~Pacific ~~and~~Northwest’s ~~product~~unique ~~recognition~~climate to ~~better~~produce ~~support~~aged ~~the~~whiskeys ~~wholesale~~that ~~launches~~are ~~of the best performing products and brands in the general market.~~

Labelling and Innovative Packaging Initiatives. We recognize the importance of packaging and product labelling and their influences on consumers’ purchasing practices. We conduct surveys and consumer research to validate the taste profile and positioning of our products. As we grow and can access more resources, we expect our ability to refine our products in response to consumer interests will improve.

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~~Production~~authentic to our name and of the highest quality. Depending on the particular product, ingredients are blends of corn, rye, malted barley, unmalted barley, peated malt and wheat. Once aged in heavy-charred American Oak barrels, the finished product is bottled at 94 to 100 proof. Future releases could also include barrel-strength releases to be priced at the high end of the super-premium range. Each barrel is bottled, hand labeled, and hand numbered with sequentially-numbered bottles. All whiskeys under this brand are aged at least four years and are selected based on stringent tasting protocols we developed. Aged whiskeys are priced at super-premium prices and are frequently supply-constrained due to market demand and the time required to produce these products.

WeSales ~~have two distilleries~~ and two warehouses comprising an aggregate of approximately 100,000 square feet dedicated to end-to-end production and storage. Each distillery has and maintains mash, fermentation, distillation and bottling equipment. We began production of spirits after a thorough market search for high-quality equipment at each stage of the production process. For example, we selected Italian distilling equipment that provides for gentle treatment of the spirits and easy calibration to produce clean flavor profiles. Additionally, we source barrels made by Spanish coopers using American white oak that is cured in Spain for two years. We believe these special barrels and the charring levels in each one allows us to make consistent, smooth and flavorful spirits.Distribution

~~Sustainability~~Our isgrowth ~~also~~strategy anfor ~~important~~the ~~aspect~~sale ~~of our selection of grains. Where possible, we select family farms using organic~~ and ~~regenerative~~distribution ~~processes. As an example, according to the research database Science Direct, regeneratively grown grains typically save approximately 170,000 gallons~~ of ~~water~~our ~~per~~spirits ~~barrel~~products ~~produced~~focuses ~~over~~on ~~the~~three ~~course~~primary ~~of the growing cycle.~~initiatives:

~~Based~~•Direct-to-Consumer onSales. We ~~management’s~~sell ~~estimates~~spirits directly to consumers online where legally permitted, weutilizing ~~believe~~a ~~our~~three-tier-compliant ~~current~~third-party ~~production~~platform ~~capacity~~that ~~can~~enables ~~expand~~shipment byof ~~approximately~~our ~~six~~products ~~times~~to ~~without~~46 ~~the~~states, ~~need~~covering ~~for~~approximately ~~additional~~96.8% ~~investment~~of the U.S. Aspopulation. ~~volumes~~DtC ~~grow~~sales provide higher margins, weenable ~~expect~~direct ~~that~~consumer ~~future~~relationships, ~~production~~and ~~capacity~~allow ~~will~~us ~~also~~to becollect ~~provided~~actionable bydata ~~distilleries~~related ~~affiliated~~to ~~with~~the ~~member~~geography, ~~tribes~~demographics, and product preferences of our customers. This data supports targeted marketing, repeat purchasing, and product development while also strengthening wholesale launches in ~~the~~key ~~TBN~~markets by creating consumer pull-through.

~~Raw~~•Wholesale. ~~Materials~~Wholesale distribution remains the most efficient channel for scaled volume growth. We focus our wholesale distribution on premium and ~~Suppliers~~super-premium products that improve revenue per case and margins. We distribute through major national wholesalers, including Southern Glazer’s Wine & Spirits and Republic National Distributing Company, and selectively through regional beer networks in certain states. We supplement our distributor efforts with a targeted internal sales team that is focused on account execution, education, and the generation of demand.

~~Generally,~~•Tribal ~~the~~Beverage ~~principal~~Network ~~raw~~(TBN). ~~materials~~We ~~used~~have indeveloped our ~~products~~Tribal ~~include~~Beverage ~~corn~~Network ~~and~~in ~~other~~collaboration ~~grains~~with ~~(including~~Native ~~rye,~~American ~~barley,~~tribes ~~wheat,~~following ~~and~~the ~~barley~~2018 ~~malt)~~repeal ~~and~~of ~~flavorings.~~a ~~The~~federal ~~principal~~prohibition ~~materials~~on ~~used~~spirits inproduction ~~the~~on ~~packaging~~tribal oflands. ~~our~~Under ~~spirits~~this ~~include~~model, ~~oak~~in ~~barrels,~~the ~~glass~~typical ~~bottles,~~TBN ~~labels~~collaboration, ~~aluminum~~our ~~cans~~tribal ~~and~~partners ~~cartons.~~will ~~These~~construct ~~materials~~and ~~are~~own ~~generally~~Heritage-branded ~~readily~~micro ~~available~~production ~~from~~hubs ~~several~~and ~~sources,~~Heritage-branded ~~except~~stores ~~for~~and ~~new~~tasting ~~oak~~rooms ~~barrels,~~on ~~which~~tribal ~~are~~lands ~~available~~and ~~from only a more limited number of sources. As~~ we ~~have~~will ~~historically~~receive ~~sourced~~development ~~grains~~fees ~~from~~and ~~farms~~ongoing ~~with~~royalties ~~which~~on wegross ~~have~~sales ~~personal~~through ~~relationships,~~licenses we ~~have~~grant ~~few~~to ~~long-term~~use ~~contracts~~our inbrands, ~~place~~products, ~~with~~recipes, ~~suppliers.~~programs, ~~However~~IP, ~~these~~new ~~raw~~product ~~materials~~development, ~~are~~on-going ~~sometimes~~compliance ~~affected by weather~~ and other ~~forces that could impact production and quantity~~support.

As of December 31, 2025, there were 532 tribal casinos across 29 states, generating approximately $44 billion in annual revenue. We estimate that approximately 250 locations are viable candidates for participation in the TBN.

Production Strategy and Margin Expansion

In October 2025, we announced a transition to third-party contract production of our craft spirits products beginning in early 2026, accompanied by significant reductions in fixed overhead and headcount. These actions are expected to materially reduce our unabsorbed overhead per case, improve gross margins, and positively impact the net income of our spirits segment, while maintaining brand quality and supply reliability.

Additionally, excess supplies of Kentucky bourbon inventories, now exceeding approximately 16.1 million barrels, compared to a historical average of 3.8 million, has significantly reduced wholesale barrel pricing. This decline is expected to materially lower our input costs for premium whiskey, creating a favorable arbitrage opportunity as we scale our Salute Series and certain other whiskey brands.

Competition

~~The~~Competition ~~alcoholic~~for ~~beverage~~$IP ~~industry~~Tokens. isThousands ~~highly~~of ~~competitive.~~digital Weassets ~~believe~~have been developed since the ~~principal~~inception ~~areas~~of Bitcoin, which is currently the most developed digital asset because of ~~competition~~the ~~include,~~length ~~among~~of ~~others,~~time ~~flavor,~~it ~~packaging~~has ~~and~~been ~~positioning~~in ~~innovations~~existence, ~~pricing,~~the ~~and~~investment ~~distribution~~in ~~locations~~the ~~and~~infrastructure ~~shelf~~that ~~space~~supports it, asand ~~well~~the asnetwork ~~promotional~~of individuals and ~~marketing~~entities ~~strategies~~that are using Bitcoin in transactions. ~~Our~~While ~~products~~$IP ~~compete~~Tokens ~~with~~have aenjoyed ~~wide~~some ~~range~~success ofin ~~other~~their ~~beverages~~limited history, ~~including~~the ~~spirits,~~aggregate ~~beers~~value ~~and~~of ~~wines,~~outstanding ~~and~~$IP ~~other~~Tokens ~~alcoholic~~is ~~beverages,~~much smaller than that of Bitcoin and ~~increasingly~~many ~~non-alcoholic~~other ~~beverages~~digital ~~designed~~assets, and ~~marketed~~may tobe ~~mimic~~further ~~the~~eclipsed ~~flavor~~by ofthe ~~alcoholic~~more ~~beverages.~~rapid ~~Many~~development of ~~these~~other ~~products~~digital ~~are~~assets. ~~produced~~In byaddition, a ~~relatively large~~ number of ~~companies,~~other ~~many~~blockchain-based ofor ~~which~~digital ~~have~~asset-oriented ~~substantially~~protocols ~~greater~~also ~~financial,~~function ~~marketing~~as ~~and~~intellectual ~~distribution~~property ~~resources~~rights ~~than~~management wesystems, doincluding Audius, LBRY and Royal.io.

~~Within~~Spirits ~~the~~Segment ~~craft~~Competition. ~~spirits~~The ~~segment~~alcoholic ofbeverage ~~the~~industry ~~market,~~is ~~important~~intensely ~~factors~~competitive, ~~affecting~~with ~~our~~significant ~~ability~~competition tofrom ~~compete~~global ~~include~~spirits ~~speed~~companies, ofcraft ~~innovation~~producers, ~~product appeal~~ and ~~differentiation~~emerging tonon-alcoholic ~~consumers,~~alternatives. ~~brand~~Key ~~and~~competitive ~~product~~factors ~~image,~~include ~~taste~~innovation ~~and flavor of products~~speed, ~~trade~~brand ~~and consumer promotions~~differentiation, ~~attractive~~ packaging, ~~product placement and distribution~~pricing, access to ~~capital and other resources, marketing and pricing. We also rely on our distributors to provide stable and reliable~~ distribution ~~and to secure adequate shelf space in retail outlets. Competitive pressures could cause our products to lose market share or experience price erosion~~, ~~which could materially impact our business~~ and ~~the results of operations. These pressures could include directly competitive innovations, new products that are better aligned with consumer preferences, greater~~ marketing ~~spending, better placements, or a decline in consumer interest in the craft spirits segment overall~~investment.

We have experienced, and continue to experience, competition from new entrants in the craft spirits category. According to the American Craft Spirits Association, in 2023 there were approximately 2,800 active craft distilleries in the United States. Leading global participants entering and operating in the craft spirits market through the acquisition of small brands include Rémy Cointreau, William Grant & Sons, Pernod Ricard SA (OTC: PRNDY), Anchor Brewers & Distillers, Diageo PLC (NYSE: DEO) and Rogue Ales & Spirits. While competition in the craft spirits space is growing, most craft producers attempt to boast about a singular accomplishment, such as a singular product, a special package or a single marketing idea. We believe we offer several advantages relative to our competitors, including: a complete and end-to-end experience and product positioning; superior production methods resulting in award-winning products; a savvy and experienced team; an on-ramp for national distribution growth; a unique go-to-market growth route through the TBN; and creative marketing strategies. We believe few participants in the craft spirits segment can point to a similar collection of assets and opportunities.

The Kentucky Distillers Association reports that as of the end of 2024 more than 14 million barrels of Kentucky bourbon were aging in warehouses in the state, the highest number ever, with the expectation of 3 million more barrels

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~~being~~Large ~~added~~global ~~this~~players ~~year.~~increasingly ~~Historically,~~acquire atsuccessful ~~steady-state~~craft brands, ~~there~~validating ~~were approximately 3.8 million barrels aging at any time. This huge increase in aging bourbon comes from~~ the ~~entry~~category ofwhile ~~numerous~~intensifying ~~investors who bought into large lots of bourbon barrels anticipating prices would continue to rise as they let them sit in warehouses to age~~competition. AsWe abelieve ~~result~~our ofadvantages ~~the~~include ~~volume~~our ofaward-validated ~~supply in the state~~quality, ~~and~~diversified ~~with more being made and even more production capacity coming online~~channels, ~~prices for barrels of~~ premium ~~quality~~focus, ~~Kentucky bourbon are falling. We now have access to our pick of premium~~affinity-~~aged~~based ~~Kentucky~~branding, ~~bourbon that we use to supplement for our Salute Series line of whiskey. Just as we are increasing volume~~ and ~~sales of the Salute Series line,~~ our ~~biggest~~proprietary ~~input~~tribal ~~cost~~collaboration -model ~~premium~~that ~~Kentucky bourbon -~~ is ~~coming~~difficult ~~down~~to ~~significantly~~replicate. ~~We believe this represents a significant arbitrage opportunity in our favor and we do not yet see signs of falling prices finding a floor.~~

Regulatory Matters

Along with our distributors, retail accounts and ingredients and packaging suppliers, we are subject to extensive regulation in the United States by federal, state and local government authorities with respect to registration, production processes, product attributes, packaging, labeling, storage and distribution of the craft spirits, ~~RTD canned cocktails and other products~~ we produce. When we work with tribes, we are also subject to certain tribal requirements.

We are subject to state and local tax requirements in all states in which our products are sold, as well as federal excise taxes on spirits we remove from bond. We monitor the requirements of relevant jurisdictions to maintain compliance with all tax liability and reporting matters. In states in which we maintain distilleries and tasting rooms, we are subject to several governmental authorities, including city and county buildings, land use, licensing and other codes and regulations.

We have contracted with a third party to manage our regulatory licensing and renewal activities. We maintain licenses that enable us to distribute our craft spirits and ready-to-drink (“RTD”) pre-mixed cocktails in ~~all~~multiple 50 states ~~plus~~and ~~Washington,~~we ~~D.C.,~~work ~~and~~with tothird-party retailers that sell a cross-section of our premium spirits directly to consumers in 46 states via a three-tier compliant third-party firm. We currently utilize software tools that are generally available to the industry and work with our license compliance service provider to navigate and manage the complex state-by-state tax and other regulations that apply to our operations in the alcoholic beverage industry. This has enabled us to expand our operations and to grow our revenue while reducing the administrative burden of tax compliance, reporting and product registration. We plan to leverage our expertise and relationships with third-party service providers in this area to assist tribes participating in the TBN.

Alcohol-related regulation

We are subject to extensive regulation in the United States by federal, state and local laws and regulations regulating the production, distribution and sale of consumable food items, and specifically alcoholic beverages, including by the Federal Alcohol and Tobacco Tax and Trade Bureau (the “TTB”) and the Food and Drug Administration (the “FDA”). The TTB is primarily responsible for overseeing alcohol production records supporting tax obligations, issuing spirits labeling guidelines, including input and alcohol content requirements, as well as reviewing and issuing certificates of label approval, which are required for the sale of spirits and alcoholic beverages through interstate commerce. We carefully monitor compliance with TTB rules and regulations, as well as the state laws of each state in which we sell our products. In the states in which our distilleries are located, we are subject to alcohol-related licensing and regulations by many authorities, including the state department of alcohol beverage control or liquor control. State agents and representatives investigate applications for licenses to sell alcoholic beverages, report on the moral character and fitness of alcohol license applicants and the suitability of premises where sales are to be conducted and enforce state alcoholic beverages laws. We are subject to municipal authorities with respect to aspects of our operations, including the terms of our use permits. These regulations may limit the production of alcoholic beverages and control the sale of alcoholic beverages, among other elements.

Employee and occupational safety regulation

We are subject to certain state and federal employee safety and employment practices regulations, including regulations issued pursuant to the U.S. Occupational Safety and Health Act (“OSHA”), and regulations governing prohibited workplace discriminatory practices and conditions, including those regulations relating to COVID-19 virus transmission mitigation practices. These regulations require us to comply with manufacturing safety standards, including protecting our employees from accidents, providing our employees with a safe and non-hostile work environment and being an equal opportunity employer. We are also subject to employment and safety regulations issued by state and local authorities.

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Environmental regulation

Due to our distilleries and production activities, we and certain third parties with which we work are subject to federal, state and local environmental laws and regulations. Federal regulations govern, among other things, air emissions, wastewater and stormwater discharges, and the treatment, handling and storage and disposal of materials and wastes. State environmental regulations and authorities intended to address and oversee environmental issues are largely state-level analogs to federal regulations and authorities intended to perform similar purposes.

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Privacy and security regulation

We collect personal information from individuals. Accordingly, we are subject to several data privacy and security related regulations, including but not limited to: U.S. state privacy, security and breach notification laws; the General Data Protection Regulation (“GDPR”); and other European privacy laws, as well as privacy laws being adopted in other regions around the world. In addition, the Federal Trade Commission and many state attorneys general have interpreted existing federal and state consumer protection laws to impose evolving standards for the online collection, use, dissemination and security of information about individuals. Certain states have also adopted robust data privacy and security laws and regulations. In response to such data privacy laws and regulations and those in other countries in which we do business, we have implemented several technological safeguards, processes, contractual third-party provisions, and employee trainings to help ensure that we handle information about our employees and customers in a compliant manner. We maintain a global privacy policy and related procedures and train our workforce to understand and comply with applicable privacy laws.

Digital asset regulation

$IP Tokens and other digital assets are relatively novel and the application of state and federal securities laws, taxes and other laws and regulations to digital assets is unclear in certain respects. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions related to digital assets. For example, the U.S. executive branch, the Securities and Exchange Commission (“SEC”) and the European Union’s Markets in Crypto Assets Regulation, among others, have been active in recent years, and in the U.K., the Financial Services and Markets Act 2023 became law. Moreover, the regulatory status of digital asset treasury companies like us is currently uncertain. We will continue to monitor laws and regulations related to digital assets to determine any compliance changes that we need to make.

Intellectual Property

We strive to protect the reputation of our brand. We establish, protect and defend our intellectual property in several ways, including through employee and third-party nondisclosure agreements, copyright laws, domestic and foreign trademark protections, intellectual property licenses and social media and information security policies for employees. We have been granted over 75 trademark registrations in the United States for, among others, Heritage Distilling®, Heritage Distilling Co. (Stylized)®, our HDC Logo®, Cask Club®, Tribal Beverage Network® and the individual names and logos of certain of our products and numerous trademark registrations in other countries for the Heritage Distilling®, Heritage Distilling Co. (Stylized)®, HDC Logo® marks and the names and logos of certain Heritage products. We expect to continue to file trademark applications to protect our spirits brands.

We have also been granted copyright registration in the first version of our website located at www.heritagedistilling.com. Information contained on or accessible through our website is not incorporated by reference in or otherwise a part of this ~~filing~~prospectus. As a copyright exists in a work of art once it is fixed in tangible medium, we intend to continue to file copyright applications to protect newly-developed works of art that are important to our business.

We also rely on, and carefully protect, proprietary knowledge and expertise, including the sources of certain supplies, formulations, production processes, innovation regarding product development and other trade secrets necessary to maintain and enhance our competitive position.

Human Capital

As of ~~December~~March 31, ~~2024~~2026, we had 8321 employees, of which 21one worked part-time. Of our 8321 employees, we employed 14 in corporate and administrative capacities, 7five in marketing, ~~and~~ sales, and e-commerce activities, ~~41 in retail activities~~ and 21two in production, warehouse, and product development activities. None of our employees is covered by a collective bargaining agreement.

We believe our employees are key to achieving our business objectives. Our key human capital measures include employee safety, turnover, absenteeism and productivity. We frequently benchmark our compensation practices and benefit programs against those of companies in comparable industries and in the geographic areas where our facilities are located. We believe our compensation and employee benefits are competitive and allow us to attract and retain skilled and unskilled labor throughout our organization. Our notable health, welfare and retirement benefits include:

•company-subsidized health insurance;

•401(k) Plan;

•tuition assistance program via FSA savings plan; and

•paid time off.

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Employee safety is one of our top priorities. We develop and administer company-wide policies designed to ensure the safety of each team member and compliance with OSHA standards. Throughout the COVID-19 pandemic, we were deemed an essential employer and continued to operate with COVID-19 prevention protocols in place to minimize the risk of the spread of COVID-19 in our workplaces. Many of our administrative staff were required to work from home.

We strive for workforce retention with semi-annual retention bonuses for hourly employees and critical new hires. New and open positions are posted for viewing by our current workforce, and internal promotions are encouraged.

We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment. We require and provide training for our employees covering harassment, discrimination and unconscious bias. This training is tracked and recorded by us and is mandatory for all new hires. Our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline. Our policies require all reports of inappropriate behavior to be promptly investigated with appropriate action taken.

Seasonality

We experience some seasonality in our spirits business whereby the peak summer months and the winter holidays show a higher level of sales and consumption. However, the structure of our business and range of products in our portfolio are designed to mitigate major fluctuations. Based on historical activities, more than one-third of our annual revenue is ~~earned in the fourth quarter of each year, and absent a major disruption or change in operations, management does not anticipate that to change in the foreseeable future.~~

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earned in the fourth quarter of each year, and absent a major disruption or change in operations, management does not anticipate that to change in the foreseeable future.

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this filing, including our financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our securities. The occurrence of any of the following risks could have a material and adverse effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability to accomplish our strategic objectives. As a result, the trading price of our securities could decline, and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and stock price. A summary of the risks discussed in greater detail in this Item 1A is as follows:

~~Risks~~•Our ~~Related~~operating history and evolving business make it difficult to ~~Our~~evaluate ~~Financial~~our ~~Position~~prospects and ~~Capital Needs~~risks.

•We have a history of losses, ~~anticipate increasing our operating expenses in the future~~ and may not achieve or maintain profitability in the future.

We•Our ~~have~~historical afinancial ~~history~~statements ofdo ~~operating~~not ~~losses,~~reflect ~~including operating losses of $(14,918,810) and $(11,264,559) for~~ the ~~years~~potential ~~ended~~variability ~~December 31, 2024 and 2023, respectively, and have incurred net losses~~ in ~~each~~earnings ~~prior~~that ~~year~~we ~~since~~may ~~our~~experience ~~inception other than~~ in ~~2021,~~ the ~~year~~future inrelating ~~which~~to ~~we sold a controlling interest in~~ our B$IP SToken ~~B — B rown S ugar B ourbon (“Flavored Bourbon”) brand~~holdings. ~~We had an accumulated deficit of $74~~Moreover,~~134,018~~ ~~and~~our ~~total~~quarterly ~~stockholders’equity~~operating ~~of $791~~results,~~767~~ ~~at December 31~~revenues, ~~2024 (after taking into account all convertible note conversions~~ and ~~the~~expenses ~~recognition~~may offluctuate ~~the associated fair value changes)~~significantly, ~~and~~which ~~there~~could ~~can~~have bean noadverse ~~assurance~~effect ifon orthe ~~when~~market weprice ~~will~~of ~~produce sufficient revenue from~~ our ~~operations~~common ~~to support our costs~~stock. We must generate and sustain higher revenue levels in future periods to become profitable, and, even if we do, we may not be able to maintain or increase our profitability. We expect to continue to incur losses for the foreseeable future as we expend substantial financial and other resources on, among other things:

•~~sales~~Actions ~~and~~related ~~marketing~~to cryptocurrencies, including ~~expanding~~but ~~our~~not ~~direct~~limited ~~sales~~to, ~~organization~~accepting, accumulating or acquiring $IP Tokens or other cryptocurrencies, and ~~marketing~~risks ~~programs~~associated with their volatility, ~~particularly~~stability, ~~for~~price, ~~larger~~utilization, ~~customers~~adoption, recognition, regulation, taxation, storage, handling and ~~for~~security ~~expanding~~of transacting, holding or using such cryptocurrencies in our ~~Tribal~~business, ~~Beverage~~could ~~Network~~impact ~~efforts;~~our financial condition, liquidity and profitability.

•~~investments~~The inprice ~~our~~of ~~distillation~~$IP ~~and~~Tokens ~~production~~has ~~team,~~been highly volatile and ~~the~~such ~~development~~volatility ofmay ~~new~~adversely ~~formulations~~affect ~~and~~our ~~enhancements~~results of ~~our~~operations ~~existing~~and ~~brands;~~stock price.

•~~expansion~~$IP ofTokens ~~our~~and ~~ready-~~other digital assets are novel assets and are subject to~~-drink~~ ~~canned~~significant ~~cocktails~~legal, ~~into~~commercial, ~~national~~tax, ~~distribution;~~regulatory and technical uncertainty, which could materially adversely affect our financial position, operations and prospects.

•~~hiring~~In ~~additional~~connection ~~personnel~~with toour ~~add~~focus on $IP Tokens, we expect to ~~our~~interact ~~production~~with ~~teams~~various ifsmart wecontracts ~~can~~deployed ~~successfully~~on ~~increase~~the ~~our~~Story ~~wholesale~~Network, ~~sales;~~which may expose us to risks and technical vulnerabilities.

•~~general~~There ~~administration,~~is ~~including~~a ~~legal~~possibility that $IP Tokens may be classified as a “security,” ~~accounting~~which would subject us to additional regulation and ~~other~~could ~~expenses~~materially ~~related~~impact tothe ~~being~~operations aof ~~public~~our ~~company~~treasury strategy and our business.

•We face risks relating to the custody of our digital assets, including the loss or destruction of private keys required to access our digital assets and cyberattacks or other data loss relating to our digital assets, including smart contract related losses and vulnerabilities.

•We could be materially adversely affected by health concerns such as, or similar to, the COVID-19 pandemic, food-borne illnesses, and negative publicity regarding food quality, illness, injury or other health concerns.

•We face experienced and well capitalized competition and could lose market share to these competitors.

•We could fail to attract, retain, motivate or integrate our personnel.

•We may not be able to maintain and continue developing our reputation and brand recognition.

•We could fail to maintain our company culture as we grow, which could negatively affect our business.

•Our growth strategy will subject us to additional costs, compliance requirements, and risks.

•We could fail to effectively manage our growth and optimize our organizational structure.

•There may be uncertainties with respect to the legal systems in the jurisdictions in which we operate.

•As we expand our product offerings, we may become subject to additional laws and regulations.

•We may be subject to claims, lawsuits, government investigations, and other proceedings.

•Our failure to protect or enforce our intellectual property rights could harm our business.

•Claims by others that we infringed their intellectual property rights could harm our business.

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•Changes in laws relating to privacy and data protection could adversely affect our business.

•We are subject to changing laws regarding regulatory matters, corporate governance, and public disclosure that could adversely affect our business or operations.

•We could lose momentum with our TBN efforts, or fail to secure substantial numbers of new agreements, or fail to maintain the agreements we already have. As it relates to TBN, we could also see a degradation of our brand if we cannot ensure product quality and consistency throughout all locations.

•Our failure to maintain an effective system of internal control over financial reporting could adversely affect our ability to present accurately our financial statements and could materially and adversely affect us, including our business, reputation, results of operations, financial condition or liquidity.

Risks Related to Our Financial Position and Capital Needs

We have a history of losses and our profitability may be subject to large swings in the future due to changes in the value of the $IP Tokens we own based on their value in the market.

We have a history of operating losses, including operating losses of $133,944,431 and $14,918,810 for the years ended December 31, 2025 and 2024, respectively, and have incurred net losses in each prior year since our inception other than in: 2021, the year in which we sold a controlling interest in our B S B — B rown S ugar B ourbon (“Flavored Bourbon”) brand; and 2024, when we reported a $14.0 million change in fair value of convertible notes. While we had an operating profit of $1,855,202 and net income of $196,263,893 for the three month period ended September 30, 2025 (due primarily to our recognition of crypto and other related revenues from our recently-created validator operations and staking rewards) and as a result of the increase in the fair value of our $IP Token investment, for which we recognized a $245,841,410 gain on change in fair value of intangible digital assets, we also recognized an offsetting $364,041,359 loss on change in fair value of intangible digital assets for the three months ended December 31, 2025 due to the closing price of the $IP Tokens we held at that date. Because the pricing of the $IP Token in the marketplace is volatile and subject to swings, there can be no assurance that we will continue to produce sufficient revenue from our $IP Tokens and related operations and/or spirits operations, or to recognize continued or consistent gains on our $IP Token treasury reserve, to support our costs. We must continue to generate and sustain higher revenue levels (and/or lower cost levels) in future periods to remain profitable and, even if we do, we may not be able to maintain or increase our profitability.

While we recently implemented structural changes in our spirits segment to reduce expenses and overhead, there can be no assurance that such changes will make our spirits segment profitable. In addition, we expect to continue to incur substantial gains and losses from changes in the fair value of our intangible digital assets for the foreseeable future. Our $IP Token validation revenue is also expected to fluctuate as the market value of the $IP Tokens, in which the revenue is paid, fluctuates. We expect to continue to expend substantial financial and other resources on, among other things:

•sales and marketing in our spirits segment, including expanding our direct sales organization and marketing programs, particularly for larger customers and for expanding our Tribal Beverage Network efforts;

•in our spirits segment, for the development of new formulations and enhancements of our existing brands;

•general administration, including legal, accounting and other expenses related to being a public company;

•Increases in insurance premiums related to our digital asset treasury holdings and strategy; and

•specific spirits-related wind-down expenses, equipment or tenant improvement write downs, or adjustments for retail locations we have closed or plan to close or equipment we have taken or plan to take offline as we reduce our real estate footprint, move to third-party production and work to get asset-light.

These expenditures may not result in additional revenue or the growth of our business. Accordingly, we may not be able to generate sufficient revenue to offset our expected cost increases and achieve and sustain profitability. If we fail to achieve and sustain profitability, the market price of our common stock could decline.

AsOur wehistorical ~~have~~financial ~~incurred~~statements ~~recurring~~do ~~operating~~not ~~losses~~reflect ~~and~~the ~~negative~~potential ~~cash~~variability ~~flows~~in ~~from~~earnings ~~operations~~that ~~since~~we ~~our~~may ~~inception,~~experience ~~there~~in isthe nofuture ~~assurance~~relating ~~that~~to weour ~~will~~$IP beToken ~~able~~holdings. toMoreover, ~~continue~~our asquarterly aoperating ~~going~~results, ~~concern~~revenues, ~~absent~~and ~~additional~~expenses ~~financing~~may fluctuate significantly, which wecould ~~may~~have ~~not~~an beadverse ~~able~~effect toon ~~obtain~~the onmarket ~~favorable~~price ~~terms,~~of orour atcommon ~~all~~stock.

WeOur ~~have~~historical ~~incurred~~financial ~~operating~~statements ~~losses~~for ~~since~~the ~~our~~year ~~inception~~ended ~~and~~December ~~there can be no assurance if or when we will produce sufficient revenue from our operations to cover our costs. Even if profitability is achieved in the future~~31, we2024 ~~may~~do not bereflect ~~able to sustain profitability consistently. We expect to continue to incur substantial losses and negative cash flow from operations for~~ the ~~foreseeable~~potential ~~future.~~variability ~~Our financial statements included~~ in ~~this~~earnings ~~filing have been prepared assuming~~ that we ~~will~~experienced continue as a going concern. However, we have concluded that, absent access to additional working capital, substantial doubt about our ability to continue as a going concern exists and our auditors have referred to this in ~~their audit report on our audited consolidated financial statements for~~ the ~~years~~year ended December 31, ~~2024~~2025 ~~and~~or ~~2023. As a result, it~~ may beexperience ~~more~~in ~~difficult~~the ~~for us to attract investors. Our~~ future isfrom ~~dependent~~holding ~~upon~~or ~~our~~selling ~~ability~~significant toamounts ~~obtain financing and upon future profitable operations from the sale~~ of ~~our~~$IP ~~products and services~~Tokens.

Our ability to obtain additional financing will be subject to many factors, including market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay or scale back our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and our business relationships with third parties, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives, including selling some or all of our aging barreled spirits inventory or equipment. The sale of such assets could impact our operations and our ability to produce products for sale and diminish future revenue opportunities. Any of these actions would likely result in our stockholders losing some or all of their investment in us.

We do not have any credit facilities as a source of future funds, and if we need additional financing, there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, or at all. We may seek additional capital through a combination of private and public equity offerings, debt financing and strategic collaborations. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, which could increase our expenses and require that our assets secure such debt. Moreover, any debt we incur must be repaid regardless of our operating results.

Our future capital needs are uncertain, and we may need to raise additional funds to support those needs.

We believe we will need to raise additional capital in 2025 to cover our expenses and meet our growth objectives for the remainder of the year. We have the ability to draw down on the equity line of credit (ELOC) we put in place in February 2025, and we have an open private placement in the form of our Series B Preferred Stock offering. However, we may need to seek such additional financing through the offering of other instruments or securities, namely to:

•fund operations or fulfill previously existing commitments;

•develop or acquire additional brands or products;

•expand our sales and marketing efforts to further commercialize our products and TBN-related services;

•hire additional personnel;

•add operational, financial and management information systems;

•pay increased expenses as a result of operating as a public company; and

•expand our research and development efforts to expand and improve our product offerings and to successfully launch new products.

Our future funding requirements will depend on many factors, including:

•the trading price and volumes of our common stock in the public market;

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~~•market~~The ~~acceptance~~price of $IP Tokens is subject to dramatic price fluctuations and is highly volatile. For example, from February 13, 2025 (the date $IP Tokens first became available on digital asset trading platforms) through March 31, 2026, the price of $IP Tokens, as reported by Coinbase.com, ranged from a low of $0.516 to a high of $14.908. We determine the fair value of our ~~products~~$IP Tokens based on prices reported by Coinbase.com, and ~~services;~~pursuant to Accounting Standards Update No. 2023-08 (“ASU 2023-08”), we are required to measure our $IP Token holdings at fair value in our statement of financial position and to recognize gains and losses from changes in the fair value of our $IP Tokens in our statement of operations each reporting period, which may create significant volatility in our reported results of operations and increase or decrease the carrying value of our digital assets, which in turn could have a material effect on the market price of our common stock. Conversely, any sale of $IP Tokens at prices above our carrying value for such assets would create a gain for financial reporting purposes even if we would otherwise incur an economic or tax loss with respect to such transaction, which also may result in significant volatility in our reported results of operations.

~~•the~~Because ~~cost~~we intend to purchase additional $IP Tokens in future periods and ~~timing~~increase our overall holdings of ~~establishing~~$IP ~~additional~~Tokens, ~~sales~~we expect that the proportion of our total assets represented by our $IP Token holdings will increase in the future. As a result, ~~marketing~~volatility ~~and~~in ~~distribution~~our ~~capabilities;~~results of operations may be significantly more than what we experienced in prior periods.

•For many reasons, including those described below, our ~~ability~~operating toresults, ~~expand~~revenues, and expenses may vary significantly in the ~~TBN~~future ~~and~~from quarter to ~~generate~~quarter. ~~royalty~~These ~~revenues~~fluctuations ~~therefrom;~~could have an adverse effect on the market price of our listed securities.

~~•the~~Our ~~cost~~quarterly ofoperating ~~our~~results ~~research~~may ~~and~~fluctuate, ~~development~~in ~~activities;~~part, as a result of:

•fluctuations in the ~~success~~market price of ~~our~~the ~~existing~~$IP ~~distribution~~Token, ~~and~~of ~~marketing~~which ~~arrangements~~we have significant holdings and ~~our~~with ~~ability~~respect to ~~enter~~which ~~into~~we ~~additional~~expect ~~arrangements~~to incontinue ~~the~~to make significant future; purchases, and potential fair value changes associated therewith;

•~~how~~any ~~competing~~sales ~~products~~by ~~and~~us ~~market~~of ~~developments~~our in$IP ~~our~~Tokens ~~industry~~at ~~impact~~prices ~~our~~above ~~position~~or below their carrying value, which would result in ~~the~~our ~~market~~recording ~~and~~gains ~~how~~or ~~consumers~~losses ~~view~~upon usthe ~~and~~sale of our ~~products.~~$IP Tokens;

There can be no assurance that we will be able to obtain additional funds on acceptable terms, or at all. Our ability to obtain additional financing will be subject to market conditions, our operating performance and investor sentiment, among other factors. If we raise additional funds by issuing equity or equity-linked securities, including through •the ~~equity~~incurrence ~~line~~ of ~~credit~~tax ~~(ELOC)~~liabilities oron ~~the~~future ~~sale~~unrealized ofgains additional shares of preferred stock or other securities or instruments our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing may contain terms that are not favorable to us or our stockholders. If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations. Any of these factors could have a material adverse effect on our ~~financial~~$IP ~~condition, operating results, and general business operations.~~Tokens;

We•regulatory, ~~may~~commercial, ~~continue~~and totechnical ~~have~~developments ~~limited~~related ~~capital depending on our ability~~ to ~~raise~~$IP ~~additional~~Tokens ~~equity~~ or ~~debt~~the ~~financing~~Story blockchain, ~~how~~or ~~our~~digital ~~funds~~assets ~~are~~more ~~managed and how well our products and services continue to be received in the marketplace.~~generally;

~~There~~•the ~~can~~impact beof ~~no assurance that we can timely realize our business plan~~war, ~~if at all~~terrorism, toinfectious ~~reach~~diseases ~~sustainable~~(such ~~revenues~~as toCOVID-19), ~~cover~~natural ~~future~~disasters ~~operational~~and ~~costs~~other orglobal ~~new~~events, ~~obligations~~and ~~that~~government weresponses ~~may incur~~ to ~~expand our operations. Any material deviation from our business plan timetable could require us to seek additional capital. There can be no assurance that~~ such ~~capital would be available at reasonable cost~~events, oron ~~that~~the itglobal ~~would~~economy ~~not~~and ~~materially dilute~~ the ~~investment~~market offor ~~our~~and ~~stockholders~~price ifof it$IP ~~were obtained.~~Tokens;

~~Our senior secured lender may accelerate~~ •our ~~indebtedness~~profitability and ~~foreclose~~expectations onfor ~~our~~future ~~assets.~~profitability; and

In•increases the past, we have not met certain financial covenants required pursuant to the terms of our loan agreement with our senior secured lender. These covenants include semi-annual minimum liquidity tests, semi-annual minimum interest coverage ratios and semi-annual minimum EBITDA ratios. In addition, in the past, we have missed certain reporting deadlines required pursuant to the terms of such loan agreement. While we have secured a waiver of those past covenant defaults, and have entered into a loan modification agreement that reduces our reporting requirements and our financial covenants, there is no guarantee that our senior secured lender will continue to waive future defaults, if any. If our senior secured lender were to declare a default and accelerate our indebtedness under those circumstances, or ~~were~~decreases to seize our assets, it would be very difficult, if not impossible, for us to continue normal operations. Such a result would likely have a material adverse effect on our business, liquidity, financial condition and results of operations and result in our ~~stockholders~~unrecognized ~~losing~~tax ~~some or all of their investment in us~~benefits.

~~Sustained~~We orbase ~~increasing~~our ~~inflation~~operating ~~could~~expense ~~adversely~~budgets ~~impact~~on expected revenue trends and strategic objectives. Many of our ~~operations~~expenses, such as office leases and certain personnel costs, are relatively fixed. We may be unable to adjust spending quickly enough to offset any unexpected shortfall in our ~~financial~~cash ~~condition~~flow. Accordingly, we may be required to take actions to pay expenses, such as selling $IP Tokens or using proceeds from equity or debt financings, some of which could cause significant variation in our operating results in any quarter.

~~The~~Based ~~inflation~~on ~~rate could remain high or increase in~~ the ~~foreseeable~~above ~~future. This could put cost pressure on our company faster than we can raise prices on our products. In such cases~~factors, we ~~could~~believe ~~lose~~quarter-to-quarter ~~money~~comparisons onof ~~products, or~~ our ~~margins~~operating orresults ~~profits~~are ~~could decline. In other cases, consumers may choose to forgo making purchases that they do~~ not ~~deem~~a togood beindication ~~essential,~~of ~~thereby impacting~~ our ~~growth~~future ~~plans~~performance. ~~Likewise,~~It ~~labor~~is ~~pressures~~possible ~~could~~that ~~continue~~in toone ~~increase~~or asmore ~~employees~~future ~~become increasingly focused on their own standard of living~~quarters, ~~putting upward labor costs on~~ our ~~company~~operating ~~before~~results wemay ~~have~~be ~~achieved~~below ~~some~~the orexpectations ~~all~~ of ~~our~~public ~~growth~~market ~~plans.~~analysts ~~Our management continues to focus on cost containment~~ and isinvestors. ~~monitoring~~In ~~the~~that ~~risks~~event, ~~associated with inflation and will continue to do so for~~ the ~~foreseeable~~market ~~future.~~price ~~However,~~of ~~sustained or increasing inflation could adversely impact~~ our ~~operations,~~common ~~results~~stock ofmay ~~operations and financial condition~~fall.

~~Higher~~The ~~interest~~release ~~rates~~of lockups on outstanding $IP Tokens, and the increase in the supply of $IP Tokens in circulation, may have an adverse impact on the market price of $IP Tokens, which could adversely affect our ~~ability~~business, tofinancial ~~obtain~~condition ~~debt financing~~ and ~~our~~results ~~operating~~of ~~results~~operations.

~~Interest~~A ~~rates~~substantial ~~rose~~portion ~~substantially~~of ~~between March 2022 and~~ the ~~second~~total ~~half~~number of ~~2023,~~$IP ~~and~~Tokens ~~there~~initially iscreated ~~uncertainty~~has asbeen, ~~to when~~ and ~~the rate at which interest rates~~ will ~~decline. If interest rates~~ continue to ~~rise~~be, orreleased ~~remain~~into ~~higher~~circulation, ~~than~~which wemay ~~have~~create ~~experienced~~significant indownward ~~recent~~pressure ~~history,~~on ~~there~~the ismarket aprice ~~risk~~of it$IP ~~will~~Tokens, ~~cost~~which, ~~more~~in ~~for~~turn uscould toadversely ~~conduct~~affect our ~~business~~revenues orand toliquidity ~~get access to credit~~position. ~~There is also a risk~~

Unlike certain digital assets that are introduced into circulation gradually through mining or similar mechanisms, one billion $IP Tokens were created at the launch of the Story Network, with approximately 75% of the $IP Tokens created initially subject to lock-up restrictions. These tokens are being released over time pursuant to predetermined vesting schedules, including monthly unlocks over periods of up to four years. In addition, validator rewards continue to introduce

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~~that~~new ~~consumers~~$IP ~~may~~Tokens ~~feel~~into ~~increased~~circulation, ~~economic~~resulting ~~pressure~~in ~~and~~a ~~not~~net beincrease ~~willing~~of toapproximately ~~spend on our goods or services~~25.5 ~~Management~~million ~~continues~~$IP toTokens ~~focus~~since oninception ~~interest~~(net ~~rates~~of ~~and~~token ~~their~~burns). ~~impact~~As onof ~~our~~March ~~business~~31, ~~the~~2026, ~~cost~~approximately of352 ~~borrowing~~million ~~and~~$IP ~~the~~Tokens ~~potential~~were ~~impacts~~in ~~on our future capital-raising efforts~~circulation.

~~Small~~As ~~Business~~lock-up ~~Association~~periods ~~(“SBA”)~~expire, ~~Paycheck~~including ~~Protection~~those ~~Program~~applicable ~~(“PPP”)~~to ~~loan~~allocations ~~repayment~~held ~~risk~~by the initial Story Network ecosystem participants, the Story Foundation, early backers and ~~timing~~core contributors, a significant number of $IP Tokens may become freely tradable. The release of these tokens from contractual lockups, particularly those held by early investors or insiders, could result in substantial selling activity, whether actual or anticipated. This increased supply of liquid $IP Tokens may exceed market demand and lead to sustained or accelerated declines in the market price of $IP Tokens.

InA ~~April~~decline ~~2022, we were advised we may have received a PPP loan over the amount we were qualified for~~ in ~~Round 1 of that program, and in April 2023, we received a similar notification for our Round 2 PPP loan. Those loans were part of~~ the ~~federal~~market ~~government’s~~price ~~relief package in response to the COVID-19 pandemic. The SBA had forgiven both loans as we had followed all rules associated with the use~~ of ~~proceeds~~$IP ~~under~~Tokens that program. It is possible that the SBA may determine that we must repay some of the amounts we received as PPP loans. If a demand is made by the SBA for some repayment, it is unclear at this time what the payment term length would behave ~~for~~several ~~such~~adverse ~~repayment~~effects ~~and there is a risk that the SBA may require immediate payment or payment~~ on ~~a timeline that is shorter than we anticipate. Any demand for repayment could reduce~~ our ~~working capital and available cash in a way that adversely impacts on our ability to execute our~~ business and ~~operating~~financial plans. If the SBA demands that we repay any amounts owed more than the amount of our available cash, it could force us to raise new capital under less than favorable terms that could be dilutive to stockholders, or to take on debt that could have higher borrowing costs. As of December 31, 2024, the total exposure for these two loans was $2,269,456, plus accrued interest of $107,255.condition:

We•Validator ~~could~~Yield beRevenue ~~materially~~Risk. ~~adversely~~Our ~~affected~~revenues byderived ~~health~~from ~~concerns~~validator ~~such~~activities ~~as,~~are ordirectly ~~similar~~tied to, the ~~COVID-19~~value ~~pandemic,~~of ~~food-borne~~$IP ~~illnesses,~~Tokens ~~and~~earned ~~negative~~as ~~publicity~~rewards. ~~regarding~~Although ~~food~~token ~~quality~~emissions may continue, ~~illness~~any decrease in token price would reduce the dollar value of those rewards, ~~injury~~potentially ormaterially ~~other~~impacting ~~health~~our ~~concerns~~revenue and profitability even if Story Network participation remains stable or increases.

~~The~~•Covered ~~United~~Call ~~States~~or ~~and~~Other ~~other~~Trading ~~countries~~Strategy ~~have~~Risk. ~~experienced,~~We or may ~~experience~~generate inincome ~~the~~through ~~future,~~covered ~~outbreaks~~call ofstrategies ~~viruses,~~involving ~~such~~$IP ~~as the current outbreak of the COVID-19 pandemic~~Tokens, ~~norovirus,~~and ~~Avian~~we ~~Flu~~may orexpand ~~“SARS,”~~into orother ~~H1N1.~~income-generating Ifstrategies ain ~~virus~~the isfuture ~~transmitted~~using ~~by human contact,~~ our ~~employees~~$IP orTokens. ~~customers~~Downward ~~may~~price ~~become infected~~pressure, orincreased ~~may choose~~volatility, or beshifts ~~advised,~~in toimplied ~~avoid~~volatility ~~gathering~~resulting infrom ~~public~~token ~~places,~~unlock ~~any~~events ofcould ~~which~~reduce ~~may~~option ~~adversely~~premiums, ~~affect~~increase the ~~customer~~likelihood ~~traffic~~ of ~~our~~unfavorable ~~tasting~~exercise ~~rooms~~outcomes, ~~and~~or impair our ability to ~~adequately~~effectively ~~staff~~execute ~~our~~such ~~tasting~~strategies. ~~rooms~~Additionally, ~~receive~~persistent ~~deliveries~~price ondeclines aof ~~timely basis or perform functions at~~ the ~~corporate~~$IP ~~level.~~Token ~~We also~~ may belimit ~~adversely~~the ~~affected~~willingness ifof ~~jurisdictions~~counterparties into ~~which~~engage ~~we, or the tribes~~ in ~~our~~options ~~TBN,~~transactions ~~have distilleries~~ or ~~tasting~~reduce ~~rooms impose mandatory closures, seek voluntary closures or impose restrictions on operations. Even if such measures are not implemented and a virus or other disease does not spread significantly,~~ the ~~perceived~~available ~~risk~~liquidity ofin ~~infection~~derivatives ormarkets ~~significant~~tied ~~health~~to ~~risk~~$IP ~~may adversely affect our business~~Tokens.

A•Liquidity ~~health~~and ~~pandemic~~Treasury ~~(such~~Risk. asOur ~~the~~liquidity ~~COVID-19~~position ~~pandemic)~~ is apartially ~~disease~~dependent ~~outbreak~~on ~~that~~the ~~spreads~~value ~~rapidly~~ and ~~widely~~marketability byof ~~infection~~our ~~and~~$IP ~~affects~~Token ~~many individuals in an area or population at the same time~~holdings. ~~Our~~A ~~tasting~~sustained ~~rooms~~decline ~~are places where people can gather for human connection. Customers might avoid public gathering places~~ in the ~~event~~market price of a$IP ~~health~~Tokens ~~pandemic,~~due ~~and~~to ~~local,~~increased ~~regional~~circulating orsupply ~~national governments might limit~~ or ~~ban~~otherwise ~~public~~could ~~gatherings~~reduce ~~to halt or delay~~ the ~~spread~~realizable value of ~~disease.~~our ~~The~~digital ~~impact~~asset oftreasury, aconstrain ~~health~~our ~~pandemic~~ability onto usconvert ~~might~~tokens beinto ~~disproportionately~~fiat ~~greater~~or ~~than on~~ other ~~food~~assets ~~service~~without ~~locations~~significant ~~that~~market ~~have~~impact, ~~lower~~and ~~customer~~impair ~~traffic~~our ~~and~~ability ~~that~~to ~~depend~~meet ~~less~~operational onor ~~the~~strategic ~~gathering~~funding ~~of people~~needs.

In•Market ~~addition,~~Perception weand ~~cannot~~Volatility. ~~guarantee~~Scheduled ~~that our operational controls~~ and ~~employee~~anticipated ~~training~~unlock ~~will~~events berelated ~~effective~~to inthe ~~preventing~~outstanding ~~food-borne~~$IP ~~illnesses,~~Tokens ~~food tampering and other food safety issues that~~ may ~~affect~~create ~~our~~ongoing ~~tasting~~uncertainty ~~rooms.~~in ~~Food-borne~~the ~~illness~~market, orwhich ~~food tampering incidents~~ could becontribute ~~caused~~to byincreased ~~customers,~~volatility ~~employees or food suppliers~~ and ~~transporters~~negative ~~and,~~investor ~~therefore, could be outside of our control~~sentiment. ~~Any~~Even ~~negative~~if ~~publicity relating to health concerns or the perceived or specific outbreaks of food~~large-~~borne~~scale ~~illnesses,~~selling ~~food~~does ~~tampering~~not ~~or other food safety issues attributed to one or more of our tasting rooms~~occur, or the ~~tasting~~perception ~~rooms~~ of ~~any of the tribes in our TBN, could result in~~ a ~~significant~~potential ~~decrease~~supply inoverhang ~~guest traffic in all of our tasting rooms or the tasting rooms of the tribes in our TBN, and~~ could ~~have~~depress aprices ~~material adverse effect on our results of operations. Furthermore, similar publicity or occurrences with respect to other tasting rooms or restaurants could also decrease our guest traffic~~ and ~~have~~limit aprice ~~similar material adverse effect on our results of operations and financial condition~~appreciation.

~~COVID-19~~While ~~did~~the ~~not~~Story ~~have~~Network aincludes ~~material~~mechanisms ~~impact~~intended onto ~~our~~offset ~~operations,~~inflationary ~~supply chain~~pressures, ~~liquidity~~such ~~or capital resources in 2023~~ as ~~all~~token ~~state~~burning ~~restrictions~~associated ~~were~~with ~~lifted~~transaction infees 2022. However, future shutdowns related to additional or increased outbreaks could have a negative impact on our operations, including voluntary or mandatory temporary closures of our facilities or offices; interruptions in our supply chain, which could impact the cost or availability of raw materials; disruptions or restrictions on our ability to travel or to market and ~~distribute~~certain ~~our~~validator ~~products; reduced consumer demand for our products~~ or ~~those~~delegator ~~of our customers due to bar and restaurant closures or reduced consumer traffic in bars~~actions, ~~restaurants~~there ~~and~~can ~~other~~be ~~locations~~no ~~where~~assurance ~~our~~that ~~products~~such ormechanisms ~~those~~will ofbe ~~our~~sufficient ~~customers are sold; and labor shortages. Because of our industry, we were deemed an “essential business” in the states in which we operate (Washington and Oregon), which allowed us~~ to ~~remain~~counterbalance ~~open during~~ the ~~COVID-19~~effects ~~pandemic. In the event~~ of ~~future~~ongoing ~~shutdowns~~token ~~related~~issuances to additional or increased outbreaks of COVID-19 or any other health crises, we expect that we would qualify for the same “essential business” designation, which would allow us to remain operational and ~~limit~~ the ~~impact~~release ~~to our business~~ of ~~any~~previously ~~such~~locked ~~shutdowns~~$IP Tokens.

If the market price of $IP Tokens declines significantly or remains depressed for a prolonged period due to these factors or others, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

Risks associated with our net operating loss (“NOL”) carryforwards, tax liabilities and fluctuations between reporting periods could adversely affect our results of operations and financing costs and the market price of our common stock.

In the year ended December 31, 2025, we recorded a provision for income taxes based on the applicable federal statutory tax rate of 21% and recognized a deferred income tax asset before valuation allowance of approximately $43.4 million based on our net loss before income taxes for the year ended December 31, 2025. In recording this deferred tax asset, we established a full valuation allowance against our NOL carryforwards as we could not currently conclude that it was more likely than not that the tax benefits associated with these losses would be realized. Due to changes in the $IP Token’s closing market price to $1.72 as of December 31, 2025, we recognized a loss on change in fair value of intangible digital assets of approximately $118.2 million, driven by market fluctuations in the Story Network’s native token, and a resulting net loss after income taxes of $137.7 million, our NOL carryforward increased by approximately $13.3 million during the year ended December 31, 2025.

During 2025, we engaged an independent tax advisor to perform a review under Internal Revenue Code Section 382 (“Section 382”) to determine whether changes in ownership of our capital stock may limit the future utilization of our NOL carryforwards. Section 382 generally limits the ability of a corporation to use its NOL carryforwards following an

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~~Furthermore,~~ownership our facilities and those of our customers and suppliers have been required to comply with additional regulations and may be required to comply with new regulations imposed by state and local governments in response to the COVID-19 pandemicchange, ~~including~~which ~~COVID-19~~is ~~safety~~typically ~~guidance~~defined ~~for~~as ~~production~~a ~~and~~cumulative ~~manufacturing~~shift ~~facilities.~~of ~~Compliance~~more ~~with~~than ~~these~~50 ~~measures,~~percentage orpoints ~~new measures, may cause increases~~ in ~~the~~ownership ~~cost,~~by orcertain ~~delays~~shareholders orover a ~~reduction~~rolling ~~in the volume of products produced at our facilities or those of the TBN partners of suppliers. The COVID~~three-19year ~~outbreak has also disrupted credit markets and may continue to disrupt or negatively impact credit markets, which could adversely affect the availability and cost of capital~~period. ~~Such impacts could limit our ability to fund our operations and satisfy our obligations.~~

~~The~~Based ~~extent~~on of the ~~impact~~completed onSection ~~our~~382 ~~business~~analysis, ~~financial~~we ~~condition,~~experienced ~~and~~significant ~~results~~equity ofownership ~~operations~~changes ~~from~~over ~~any~~the ~~future~~past ~~shutdowns~~three isyears ~~dependent~~primarily onas ~~the~~a ~~length~~result of ~~time in which society, consumers,~~ the ~~supply~~closing ~~chain~~of ~~and~~our ~~markets~~initial ~~return~~public tooffering ~~pre-shutdown “normal” levels~~ of ~~operations,~~common ifstock ~~they~~on ~~do at all~~November 25, 2024 and ~~whether~~the weclosing ~~qualify~~of ~~for~~a ~~“essential~~private ~~business”~~placement ~~designation~~of inour ~~the~~prepaid ~~states~~warrants inon ~~which~~August 15, ~~we operate~~2025. ~~The~~As ~~response~~a toresult ~~any~~of ~~future~~these ~~shutdowns~~ownership ~~may~~changes, ~~adversely~~our ~~impact~~ability ~~our~~to ~~business,~~utilize ~~financial~~certain ~~condition,~~NOL ~~and~~carryforwards ~~results~~generated ofprior ~~operations~~to inthose ~~one~~dates oris ~~more~~subject ~~ways~~to ~~not~~annual ~~identified~~limitations tounder ~~date~~Section 382.

~~Our~~As ~~current~~of ~~working~~December ~~capital~~31, ~~deficiency~~2024, ~~incurrence~~we had approximately $61.5 million of ~~significant~~federal ~~losses~~NOL carryforwards and ~~required~~approximately ~~additional~~$192 ~~funding~~thousand of federal tax credits subject to ~~meet~~potential ~~our~~limitation ~~obligations~~under Section 382. We generated additional net operating losses during 2025 of approximately $13.3 million and ~~sustain~~$32 ~~our~~thousand ~~operations~~of ~~raise~~federal ~~substantial~~tax ~~doubt~~credit, ~~about~~resulting ~~our~~in ~~ability~~total tofederal ~~continue~~NOL carryforwards of approximately $74.8 million and of federal tax credit of approximately $35 thousand as aof ~~going~~December 31, ~~concern~~2025 before consideration of applicable limitations. ~~Furthermore~~Under the Section 382 analysis, our ~~independent~~ability ~~registered~~to ~~public~~utilize ~~accounting~~these ~~firm~~tax ~~has~~attributes ~~included~~is limited on an ~~explanatory~~annual ~~paragraph~~basis, ~~relating~~which tomeans ~~our~~the ~~ability~~NOL tocarryforwards ~~continue~~may asonly abe ~~going~~available ~~concern~~for inuse ~~its~~gradually ~~report~~over onfuture years rather than immediately. In addition, a portion of our ~~audited~~NOL ~~consolidated~~carryforwards ~~financial~~may ~~statements~~become ~~included~~permanently inlimited ~~this~~and ~~filing.~~therefore unavailable for use.

~~The~~While ~~report~~we ~~from~~believe ~~our independent registered public accounting firm on our financial statements for the years ended December 31, 2024 and 2023 includes an explanatory paragraph stating~~ that ~~our~~a ~~working~~portion ~~capital deficiency, incurrence~~ of ~~significant losses and need to raise additional funds to meet~~ our ~~obligations~~NOL ~~and~~carryforwards ~~sustain~~may ~~our~~be ~~operations~~available ~~raise substantial doubt about our ability~~ to ~~continue~~offset astaxable aincome ~~going~~in ~~concern. We expect to continue to incur substantial losses and negative cash flow from operations for the foreseeable~~ future. ~~Our financial statements included in this filing have been prepared assuming that we will continue as a going concern. If we are unable to obtain sufficient funding to support our growth plans~~periods, ~~our~~the ~~business,~~amount ~~prospects, financial condition~~ and ~~results~~timing of ~~operations~~their ~~could~~utilization ~~be materially and adversely affected, and we may be unable to continue as a going concern. If we~~ are ~~unable~~subject to ~~continue~~the asSection a382 ~~going~~annual ~~concern,~~limitation ~~we may have to liquidate our assets~~ and ~~may receive less than the value at which those assets are carried on~~ our ~~audited~~ability ~~consolidated~~to ~~financial~~generate ~~statements,~~future ~~and~~taxable itincome. isAs ~~likely that investors will lose all or~~ a ~~part~~result of ~~their~~these ~~investment. Such action could also trigger a foreclosure by our senior secured lender~~uncertainties, ~~which~~we ~~would~~ have aelected ~~material adverse effect on our business operations. Future reports from our independent registered public accounting firm may also contain statements expressing doubt about our ability~~ to ~~continue~~fully asreserve aagainst ~~going~~the ~~concern.~~use Ifof wethese ~~seek~~tax ~~additional~~benefits ~~financing~~in ~~to fund~~ our ~~future~~financial ~~business~~statements ~~activities and there remains doubt about our ability to continue~~ as aof ~~going concern~~December 31, ~~investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all~~2025.

WeIn addition, our reported net income or loss and related tax position may befluctuate ~~subject~~significantly between reporting periods due to ~~litigation~~changes ~~from~~in ~~vendors~~the ~~for~~fair ~~unpaid~~value ~~invoices~~of its intangible digital assets associated with the $IP Token. For example, ~~which~~the ~~could~~net ~~materially~~income ~~affect~~reported ~~our~~for ~~business~~the nine-month period ended September 30, ~~results~~2025 reflected the fair value of ~~operations~~$8.54 per $IP Token as of that date. Given the volatility in the market price of the $IP Token and the closing price of $1.72 per token as of December 31, ~~financial~~2025, ~~condition~~gains previously recorded during earlier reporting periods may be offset by losses recognized in subsequent periods. As a result, any tax liability previously estimated during interim reporting periods may be reduced or ~~liquidity~~eliminated when we record the full-year change in fair value of our intangible digital assets.

WeThere have accrued sums of accounts payable for past services rendered by vendors that are overdue and, while those vendors have exhibited patience in waiting to get paid, one creditor has initiated a litigation seeking payment of amounts due and there is a risk that ~~one~~we ormay ~~more~~not ~~additional~~be ~~creditors~~able ~~could initiate litigation against us in an attempt~~ to ~~force~~utilize ~~payment~~all of ~~the~~our ~~amounts~~previous ~~owed.~~or ~~Any~~future ~~litigation~~NOL ~~could~~carryforwards ~~cause us~~ to ~~incur~~offset ~~significant~~taxable ~~costs~~income ~~defending~~or ~~such~~other ~~action.~~tax Aliabilities ~~successful~~resulting ~~suit~~from ~~could also hurt~~ our ~~credit~~operations ~~standing, making it more difficult~~ or ~~expensive~~from ~~for~~changes usin tothe ~~secure~~fair ~~additional~~value ~~funding or lines~~ of ~~credit~~our inintangible ~~the~~digital ~~future~~assets. ~~Any~~In ~~penalties~~addition, orour ~~fines~~ability ~~associated~~to ~~with~~utilize ~~such~~our ~~judgments~~NOLs could ~~also~~be ~~change~~further limited or ~~increase~~reduced ~~the~~by ~~amounts~~additional weownership ~~owe~~changes orin ~~change~~ the ~~timing~~future, ofincluding ~~payments~~those ~~owed~~resulting infrom afuture ~~way~~equity ~~that~~issuances, ~~affects~~warrant ~~our~~exercises, ~~projected cash flow~~ or ~~use~~other ofcapital ~~proceeds~~markets transactions.

Our ~~failure~~ability to ~~maintain~~benefit anfrom ~~effective~~our ~~system~~historical ofNOL ~~internal~~carryforwards ~~control~~could ~~over~~also ~~financial~~be ~~reporting~~impacted ~~could~~by ~~adversely~~strategic ~~affect~~transactions involving our ~~ability~~operating businesses. For example, if we were to ~~present~~sell, ~~accurately~~spin off, or otherwise dispose of our ~~financial~~alcohol-related ~~statements~~business ~~and~~segment ~~could~~or ~~materially~~other ~~and~~significant ~~adversely~~operating ~~affect~~assets usto a third party, ~~including~~the ~~our~~NOLs generated by those historical operations may remain with the entity that retains the losses and may not be available to offset taxable income associated with the business, ~~reputation,~~that ~~results~~is ofsold or with any remaining operations. Depending on the structure of such a transaction, ~~financial~~certain ~~condition~~tax attributes could be limited, reduced or ~~liquidity~~effectively lost, which could increase our future tax liabilities.

~~Our~~In ~~independent~~addition, ~~registered~~because ~~public~~the ~~accounting~~value ~~firm~~of ~~identified~~our ~~material~~intangible ~~weaknesses~~digital inassets ~~our~~is ~~internal~~determined ~~controls~~based ~~over~~on ~~financial~~the ~~reporting~~closing inprice ~~connection~~of ~~with~~ the ~~preparation~~$IP ofToken ~~our~~at ~~financial~~the ~~statements~~end ~~and~~of ~~audit~~each asreporting ofperiod, ~~and~~significant ~~for~~volatility in the ~~year~~$IP ~~ended~~Token ~~December 31,~~market ~~2024,~~price ~~which~~between ~~relate~~reporting toperiods acould ~~deficiency~~result in ~~the~~large ~~design~~fluctuations ~~and~~in ~~operation~~the ofchange ~~our~~in ~~financial~~fair ~~accounting~~value ~~and~~of ~~reporting~~those ~~controls~~assets. ~~Specifically,~~As ~~the~~a ~~material~~result, ~~weaknesses~~our ~~resulted~~estimate ~~from~~of ~~(i)~~quarterly aor ~~lack~~full-year ofnet ~~segregation~~income ofand ~~duties~~resulting ~~within~~tax ~~the~~liability ~~financial~~during ~~accounting~~a ~~and~~given ~~reporting~~tax ~~processes~~year ~~due~~may tochange ~~limited~~significantly ~~personnel~~from ~~and~~reporting ~~(ii)~~period ato ~~lack~~reporting ofperiod ~~adequate~~ and ~~precise~~can ~~review~~only ofbe ~~account~~determined ~~reconciliations~~with ~~and~~certainty ~~journal~~once ~~entries~~the ~~resulting~~full infiscal ~~audit~~period ~~adjustments~~has ended. AThere ~~material~~could ~~weakness~~be issubstantial ~~a deficiency~~swings, orboth ~~combination~~positive ofand ~~deficiencies~~negative, in ~~internal~~reported ~~control~~net ~~over~~income ~~financial~~or ~~reporting,~~loss ~~such~~due ~~that~~to ~~there~~changes isin athe ~~reasonable~~fair ~~possibility~~value ~~that~~of athe ~~material~~$IP ~~misstatement~~Token ofat athe ~~company’s~~end ~~annual~~of orthe ~~interim~~reporting ~~financial~~period, ~~statements~~and ~~will~~such swings may not be ~~prevented~~representative of our full-year operating results or ~~detected~~the onultimate atax ~~timely~~liability ~~basis~~for the year.

If our NOL carryforwards are limited, expire unused, or otherwise become unavailable, we could incur higher federal and state income tax liabilities than currently anticipated. Higher tax liabilities could reduce our future cash flows, net income and profitability and may adversely affect the value of our business and the returns available to our stockholders.

Sustained or increasing inflation could adversely impact our operations and our financial condition.

The inflation rate could remain high or increase in the foreseeable future. This could put cost pressure on our company faster than we can raise prices on our products. In such cases, we could lose money on products, or our margins or profits could decline. In other cases, consumers may choose to forgo making purchases that they do not deem to be essential, thereby impacting our growth plans. Likewise, labor pressures could continue to increase as employees become

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Weincreasingly ~~have~~focused ~~begun~~on totheir ~~address~~own ~~and~~standard ~~remediate~~of ~~such~~living, ~~material~~putting ~~weaknesses~~upward bylabor ~~hiring~~costs aon ~~Chief~~our ~~Financial Officer with significant accounting and public~~ company ~~financial~~before ~~reporting~~we ~~and~~have ~~compliance~~achieved ~~experience,~~some ~~and~~or inall ~~the first quarter~~ of ~~2025 we placed an experienced member of~~ our ~~finance~~growth ~~team in the role of Controller~~plans. ~~While~~Our wemanagement ~~intend~~continues to ~~implement~~focus ~~additional~~on ~~measures~~cost tocontainment ~~remediate~~and ~~the material weaknesses, there~~ is nomonitoring ~~guarantee~~the ~~that~~risks ~~they~~associated ~~can~~with beinflation ~~remediated in a timely fashion or at all. Our failure to correct these material weaknesses could result in inaccurate financial statements~~ and ~~could~~will ~~also~~continue ~~impair our ability~~ to ~~comply~~do ~~with~~so for the ~~applicable~~foreseeable ~~financial reporting requirements on a timely basis~~future. ~~While~~However, wesustained ~~believe we have addressed any regulatory~~ or ~~financial~~increasing ~~reporting~~inflation ~~issues~~could ~~highlighted~~adversely byimpact our ~~auditor~~operations, ~~such~~results ~~compliance issues, should they materialize or persist, could cause investors to lose confidence in our reported financial information and may result in volatility in and a decline in the market price~~ of ~~our~~operations ~~securities, as well as adverse directions from federal, state~~ and ~~local~~financial ~~regulatory authorities~~condition.

Small Business Association (“SBA”) Paycheck Protection Program (“PPP”) loan repayment risk and timing.

In April 2022, we were advised we may have received a PPP loan over the amount we were qualified for in Round 1 of that program, and in April 2023, we received a similar notification for our Round 2 PPP loan. Those loans were part of the federal government’s relief package in response to the COVID-19 pandemic. The SBA had forgiven both loans as we had followed all rules associated with the use of proceeds under that program. It is possible that the SBA may determine that we must repay some of the amounts we received as PPP loans. If a demand is made by the SBA for some repayment, it is unclear at this time what the payment term length would be for such repayment and there is a risk that the SBA may require immediate payment or payment on a timeline that is shorter than we anticipate. Any demand for repayment could reduce our working capital and available cash in a way that adversely impacts on our ability to execute our business and operating plans. If the SBA demands that we repay any amounts owed more than the amount of our available cash, it could force us to sell some of the $IP Tokens in our treasury reserve, to raise new capital under less than favorable terms that could be dilutive to stockholders, or to take on debt that could have higher borrowing costs. As of December 31, 2025, the total exposure for these two loans was $2,269,456, plus accrued interest of $129,950.

Certain previous sales made under our now closed equity line of credit may adversely affect our business, market perception and stock price.

On January 23, 2025, we entered into an agreement for an equity line of credit (the “ELOC Purchase Agreement”) with an institutional investor (the “ELOC Investor”) pursuant to which we, subject to the restrictions and satisfaction of the conditions in the ELOC Purchase Agreement, had the right, but not the obligation, to sell to the ELOC Investor, and the ELOC Investor was obligated to purchase, up to $15.0 million of newly-issued shares of our common stock. On July 21, 2025, we and our placement agents commenced a confidential marketing of our common stock and pre-funded warrants to a limited number of institutional accredited investors and qualified institutional buyers under a private placement financing that closed on August 14, 2025. Between July 21, 2025 and July 30, 2025, while such confidential marketing was in process and continuing, we sold to the ELOC Investor an aggregate of 427,526 shares of common stock pursuant to the ELOC Purchase Agreement for aggregate gross proceeds of approximately $3,396,161, at prices ranging from $6.40 to $9.00 per share. We ceased selling shares of common stock under the ELOC Purchase Agreement on July 30, 2025, and no further sales occurred under the ELOC Purchase Agreement after that date. After giving effect to the sales of common stock under the ELOC Purchase Agreement through July 30, 2025, we had 1,181,192 shares of common stock issued and outstanding on such date. The ELOC was canceled on December 22, 2025. While we believe we acted in good faith and in compliance with applicable laws and regulations in making such sales, it is possible that regulatory authorities or other parties could assert that material non-public information may have existed at the time of such sales. If such claims were made or are proven to be successful, such sales of common stock could result in regulatory inquiries, civil investigations, cease-and-desist orders, other potential administrative actions or private litigation brought by investors or damages resulting from such private actions. While we would vigorously defend our company in any such matters, responding to or resolving such actions could involve costs, divert management resources, and potentially impact our business, market perception and stock price.

Our failure to maintain an effective system of internal control over financial reporting could adversely affect our ability to present accurately our financial statements and could materially and adversely affect us, including our business, reputation, results of operations, financial condition or liquidity.

Our independent registered public accounting firm identified material weaknesses in our internal controls over financial reporting in connection with the preparation of our financial statements and audit as of and for the years ended December 31, 2025 and 2024, which relate to a deficiency in the design and operation of our financial accounting and reporting controls. Specifically, the material weaknesses resulted from (i) a lack of segregation of duties within the financial accounting and reporting processes due to limited personnel and (ii) a lack of adequate and precise review of account reconciliations and journal entries resulting in audit adjustments. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

We have begun to address and remediate such material weaknesses by hiring a Chief Financial Officer with significant accounting and public company financial reporting and compliance experience and by placing an experienced member of our finance team in the role of Controller. While we intend to implement additional measures to remediate the

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material weaknesses, there is no guarantee that they can be remediated in a timely fashion or at all. Our failure to correct these material weaknesses could result in inaccurate financial statements and could also impair our ability to comply with the applicable financial reporting requirements on a timely basis. While we believe we have addressed any regulatory or financial reporting issues highlighted by our auditor, such compliance issues, should they materialize or persist, could cause investors to lose confidence in our reported financial information and may result in volatility in and a decline in the market price of our securities, as well as adverse directions from federal, state and local regulatory authorities.

Section 404 of the Sarbanes-Oxley Act will require that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 10-K. It may take us time to develop the requisite internal control framework. Our management may conclude that our internal control over financial reporting is not effective, or the level at which our controls are documented, designed or reviewed is not adequate, and may result in our independent registered public accounting firm issuing a report that is qualified. In addition, the reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to complete our evaluation testing and any required remediation promptly.

Risks Related to Our Business ~~Model~~Operations

Our management team may not be able to successfully implement our business strategies.

If our management team is unable to execute our business strategies, then our development, including the establishment of revenues and our sales and marketing activities, would be materially and adversely affected. In addition, we may encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by any future growth. We may seek to augment or replace members of our management team, or we may lose key members of our management team, and we may not be able to attract new management talent with sufficient skill and experience.

If we are unable to retain key executives and other key affiliates, our growth could be significantly inhibited and our business harmed with a material adverse effect on our business, financial condition and results of operations.

Our success is, to a certain extent, attributable to the management, sales and marketing, and operational and technical expertise of certain key personnel. Justin Stiefel, our Chief Executive Officer, and Jennifer Stiefel, our President, perform key functions in the operation of our business. The loss of either officer could adversely affect our business, financial condition and results of operations. We do not maintain key-person insurance for members of our management team because it is cost prohibitive to do so at this point. If we lose the services of any senior management, we may not be able to locate suitable or qualified replacements and may incur additional expenses to recruit and train new personnel, which could severely disrupt our business and prospects.

There is a risk that the Cryptocurrency Treasury Reserve Policy we adopted, as it may be amended from time to time, does not adequately address risks regarding the acceptance, acquisition, handling, storage, use, and disposition of cryptocurrencies, which could create a number of risks for us and our stockholders

We adopted a formal Cryptocurrency Treasury Reserve Policy. As we accumulate and use cryptocurrencies, there are risks associated with the volatility, stability, price, utilization, adoption, recognition, regulation, taxation, storage, handling and security of transacting, holding or using such cryptocurrencies in our business which could impact our balance sheet, liquidity and profitability. Such risks include, but are not limited to:

•continued worldwide growth in the adoption and use of cryptocurrencies;

•government and quasi-government regulation of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of cryptocurrency systems;

•the maintenance and development of the open-source software of the Story Network and the blockchains associated with other cryptocurrencies we may hold;

•the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

•accepting cryptocurrency as a form of payment for our goods or services, and then subsequently seeing the value of such cryptocurrencies fall, which would have a negative impact on our effective net gross margin and ultimately our ability to reach or maintain profitability;

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transfer such cryptocurrencies out of our possession, which could impact our total assets, balance sheet and liquidity;

•acquiring and holding such cryptocurrencies and then selling some or all of those holdings into the market for cash before an event that increases the value of those cryptocurrencies, meaning we would have lost out on an increase in the value of that asset had we held it longer;

•selling cryptocurrencies we own such that followers of cryptocurrencies who may have become, or could have become loyal customers of ours, because we engage in the use of cryptocurrencies could view such sale as not being in line with their belief that cryptocurrency should be used to replace fiat currencies. In such cases this could result in fewer customers, fewer purchases, less revenue and an overall reduction in business relative to the trajectory we may have been on, which could impact our financial result or reputation negatively;accepting cryptocurrencies as a form of payment for goods or services could be subject to transactions fees that are higher than regular credit card processing or similar fees, which could impact our financial results, profitability and net income or loss;

•based on new accounting rules adopted by the Financial Services Accounting Board, the value of cryptocurrencies held by public companies may be marked to market. In the event we hold any such cryptocurrencies in our treasury as an asset on our balance sheet and the value or price of such cryptocurrencies fall in any one month or reporting period, it would require us to write down the value of that asset, which would negatively impact our income statement for that reporting period and increase a loss for the period, reduce any reported profits for the period, or turn a profitable period into a period with a reported loss, which could reflect poorly on us in the market and impact the price of our stock;

•there is a risk that the service providers we use for our points of sale elect to not service or stop accepting cryptocurrencies as a form of payment for us, which could restrict our access to the market and our ability to sell goods for the exchange of such cryptocurrencies that might have been part of our business or strategic plans;

•the trading prices of many cryptocurrencies, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further declines in the trading prices of cryptocurrencies we may hold or own could have a material adverse effect on our balance sheet, income, liquidity and enterprise value;

•cryptocurrencies represent a new and rapidly evolving industry, and a portion of our actual or perceived value that we garner from any future acceptance or use of such assets depends on the continued acceptance, adoption and trust of such cryptocurrencies by users and the markets; and

•a portion of the value of our shares may be related directly to the value of cryptocurrencies we may own or hold, the value of which may be highly volatile and subject to fluctuations due to a number of factors.

Our strategy may include acquiring companies or brands, which may result in unsuitable acquisitions or failure to successfully integrate acquired companies or brands, which could lead to reduced profitability.

We may embark on a growth strategy through acquisitions of companies or operations that complement our existing product lines, customers or other capabilities. We may be unsuccessful in identifying suitable acquisition candidates or may be unable to consummate desired acquisitions. To the extent any acquisitions are completed, we may be unsuccessful in integrating acquired companies or their operations, or if integration is more difficult than anticipated, we may experience disruptions that could have a material adverse impact on future profitability. Some of the risks that may affect our ability to integrate, or realize any anticipated benefits from, acquisitions include:

•unexpected losses of key employees or customers of the acquired company;

•difficulties integrating the acquired company’s products, services, standards, processes, procedures and controls;

•difficulties coordinating new product and process development;

•difficulties hiring additional management and other critical personnel;

•difficulties increasing the scope, geographic diversity and complexity of our operations;

•difficulties consolidating facilities or transferring processes and know-how;

•difficulties reducing costs of the acquired company’s business;

•diversion of management’s attention from our management; and

•adverse impacts on retaining existing business relationships with customers.

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We may enter into partnerships, co-branding arrangements, licensing agreements, co-location, joint branding or other collaborative arrangements with other brands, producers, partners or celebrities which could distract from our core business plans, create new risks for our company or otherwise dilute our efforts at growing the value of our company or our brands.

To grow our sales, increase revenue, open new channels of distribution or increase the presence of our company or a brand, we may enter in several arrangements or agreements, including but not limited to partnerships, co-branding arrangements, licensing agreements, co-location, joint branding or other collaborative arrangements, with other brands, producers, partners or celebrities. Examples of some of these arrangements could include:

•Co-branded or jointly branded products — There is a risk that the co-branding does not work or does not make sense to the consumer, which would depress sales and could result in a loss of the effort, time and money spent on developing such products. There is also a risk the other brand owner with whom we partnered on the effort may not be able to fulfill its agreements, thereby resulting in lower sales, revenue and profitability compared to expectations heading into such arrangements. There is a risk the other brand owner cannot pay its bills, becomes insolvent, files for bankruptcy, is foreclosed upon or otherwise must cease operations, in which case we could have a co-branded product without a corresponding co-branding partner. In such a case, it may also be that we lose the right to continue using the co-branded designs, recipes or trademarks because of a change in operation. There is also a risk that the entity with whom we have co-branded, or one of its employees, managers, executives, directors, or prominent shareholders, does or says something to cause harm to the co-branded product and our brand by association.

•Licensing Agreements — There is a risk that if we license to others one or more of our brands, trademarks or patents, the licensee might not pay us the licensing fees or royalties due to us for a variety of reasons. The licensee might attempt to modify or use such licensed items in an inappropriate way inconsistent with our company, the brand, or the terms of the license. There is a risk the licensee, or one of its employees, managers, executives, directors, or prominent shareholders, does or says something to cause harm to the licensed product and our brand by association.

•Co-location — We may decide to co-locate or co-brand retail spaces with other distillers or producers in their spaces to get our brand and products in front of consumers in areas of the country where we do not have a physical presence. There is a risk that the co-location does not work or does not make sense to the consumer, which would depress sales and could result in a loss of the effort, time and money spent on developing such co-location presence. There is also a risk the other brand owner with whom we partnered in the effort may not be able to fulfill its agreements, thereby resulting in lower sales, revenue and profitability compared to expectations heading into such an arrangement. There is a risk the staff of the co-location partner does not represent our brand properly to consumers, or creates confusion about the brand or the products, or otherwise encourage consumers to skip purchasing our brands in favor of trying and purchasing their own brands. There is a risk the other brand owner cannot pay its debts, becomes insolvent, files for bankruptcy, is foreclosed upon or otherwise must cease operations, in which case we could have a co-located presence without a corresponding co-location partner to fulfill its terms of the agreement. In such a case, it may also be that we lose the right to continue using the co-located space to market and sell our products. There is also a risk that the entity with which we have co-located, or one of its employees, managers, executives, directors, or prominent shareholders, does or says something to cause harm to the co-located product and our brand by association.

•Other collaborative arrangements with brands, producers, partners, or celebrities — We may enter into collaborative agreements with other brands, producers, partners, or celebrities. There is a risk that those collaborative partners might not fulfill their obligations under the agreements, or they may not pay fees or royalties due to us. They may use licenses from us in an inappropriate way inconsistent with our company, our brands, or the terms of the license. There is a risk they could do or say something to cause harm to our brand or the collaboration effort by association.

Any one or more of the above risks, if they materialize, could result in lower sales, less revenue than anticipated, less profit than anticipated or a reduction in the value of our brands or reputation or value, which could have a material adverse effect on our business or operating results.

A failure of one or more of our key IT systems, networks, processes, associated sites or service providers could have a material adverse impact on our business operations, and if the failure is prolonged, our financial condition.

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are managed, hosted, provided and used by third parties or their vendors, to assist us in the management of our business. The various uses of these IT systems, networks and services include, but are not limited to: hosting our internal network and communication systems; supply and demand planning; production; shipping products to customers; hosting our distillery websites and marketing products to consumers; collecting and storing customer, consumer, employee, stockholder, and other data; processing transactions; summarizing and reporting results of operations; hosting, processing and sharing confidential and proprietary research, business plans and financial information; complying with regulatory, legal or tax requirements; providing data security; and handling other processes necessary to manage our business.

Increased IT security threats and more sophisticated cybercrimes and cyberattacks, including computer viruses and other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other types of attacks pose a potential risk to the security of our IT systems, networks and services, as well as the confidentiality, availability, and integrity of our data, and we have in the past, and may in the future, experience cyberattacks and other unauthorized access attempts to our IT systems. Because the techniques used to obtain unauthorized access are constantly changing and often are not recognized until launched against a target, we or our vendors may be unable to anticipate these techniques or implement sufficient preventative or remedial measures. If we are unable to efficiently and effectively maintain and upgrade our system safeguards, we may incur unexpected costs and certain of our systems may become more vulnerable to unauthorized access. In the event of a ransomware or other cyber-attack, the integrity and safety of our data could be at risk, or we may incur unforeseen costs impacting our financial position. If the IT systems, networks or service providers we rely upon fail to function properly, or if we suffer a loss or disclosure of business or other sensitive information due to any number of causes ranging from catastrophic events, power outages, security breaches, unauthorized use or usage errors by employees, vendors or other third parties and other security issues, we may be subject to legal claims and proceedings, liability under laws that protect the privacy and security of personal information (also known as personal data), litigation, governmental investigations and proceedings and regulatory penalties, and we may suffer interruptions in our ability to manage our operations and reputational, competitive or business harm, which may adversely affect our business, results of operations and financial results. In addition, such events could result in unauthorized disclosure of material confidential information, and we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us or to our employees, stockholders, customers, suppliers, consumers or others. In any of these events, we could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or technological failure and the reputational damage resulting therefrom, to pay for investigations, forensic analyses, legal advice, public relations advice or other services, or to repair or replace networks and IT systems. Even though we maintain cyber risk insurance, this insurance may not be sufficient to cover all our losses from any future breaches or failures of our IT systems, networks and services.

Global conflicts and geopolitical tensions could increase cybersecurity risks and disrupt our operations, which could adversely affect our business, financial condition and results of operations.

Global conflicts and geopolitical tensions, including the ongoing war in Ukraine and Iran, tensions involving Russia, China and Taiwan, instability in the Middle East, terrorist activities, and related military actions by the United States or other countries, have increased and may continue to increase the risk of cyberattacks directed at U.S. businesses and infrastructure. Nation-state actors, affiliated proxy groups, hacktivist organizations, terrorist organizations, and other non-state or loosely affiliated actors may engage in cyber operations that are retaliatory, disruptive or opportunistic in nature. These actors may target companies based on perceived vulnerabilities rather than strategic importance, which could increase the likelihood that companies of our size and industry may be affected.

Cyber threats associated with geopolitical tensions may include, among other things, distributed denial-of-service attacks, ransomware campaigns, destructive malware, phishing and social engineering schemes, unauthorized network intrusions, data exfiltration, theft of digital assets (including cryptocurrencies), and disinformation campaigns. In addition, cyber activities may target critical infrastructure, telecommunications networks, cloud service providers, financial institutions, logistics providers and other third-party vendors upon which we rely, which could disrupt our operations even if our own systems are not directly compromised.

The techniques used to obtain unauthorized access to systems and data are constantly evolving, increasingly sophisticated, and often not recognized until launched. As a result, we and our third-party service providers may be unable to anticipate, detect or prevent all cyber threats or implement effective preventative or remedial measures in a timely manner. Our systems and those of our vendors have experienced, and may continue to experience, attempted cyberattacks and unauthorized access. Any failure to maintain, upgrade or effectively implement appropriate safeguards could increase our vulnerability.

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A cybersecurity incident or disruption, whether resulting from geopolitical activity or otherwise, could compromise the confidentiality, integrity or availability of our data, including sensitive or proprietary information belonging to us or to our employees, customers, suppliers or other stakeholders. Such incidents could result in operational disruptions, loss of business, damage to our reputation, regulatory investigations, litigation, liability under data protection and privacy laws, and significant costs related to remediation, system restoration, forensic investigations, legal and advisory services, and potential ransom payments. In addition, although we maintain cyber risk insurance, such coverage may not be sufficient to cover all losses.

While geopolitical conflicts may also contribute to volatility in supply chains, energy markets and input costs, we believe the evolving and unpredictable cybersecurity threat environment associated with such conflicts represents a particularly significant risk to our business. Accordingly, any material cybersecurity incident or related disruption could adversely affect our business, financial condition and results of operations.

Risks Related to Our Cryptocurrency Treasury Reserve Strategy and $IP Tokens

In relation to our acquisition, accumulation, holding, storing, selling, transferring or otherwise using any cryptocurrencies, there is a risk that rules or regulations could change, impacting the value of any such cryptocurrencies we hold and our ability to continue to use them or how we recognize, use and value them.

As cryptocurrencies are relatively novel and the application of state and federal securities laws and other laws and regulations to cryptocurrencies are unclear in certain respects, it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of cryptocurrencies. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of cryptocurrencies or the ability of individuals or institutions such as us to own or transfer cryptocurrencies.

If cryptocurrencies are determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of cryptocurrencies and in turn adversely affect the market price of our common stock. Moreover, the risks of us engaging in a cryptocurrency treasury strategy have created, and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future. Additional risks include, but are not limited to, changes in how we must value any cryptocurrencies we hold, which could impact our balance sheet and income statement, or our ability to hold, use or dispose of them. In addition, new forms of taxation on the receipt, accumulation, acquisition, holding, storing, transferring, selling or otherwise using cryptocurrencies could alter, diminish or destroy the value proposition for such cryptocurrencies or how we value any cryptocurrencies we may hold at that time, which could negatively impact our balance sheet or income statement.

On March 11, 2026, the SEC and the CFTC entered into a Memorandum of Understanding Regarding Harmonization in Areas of Common Regulatory Interest (the "2026 MOU"), superseding the prior July 2018 interagency memorandum of understanding. The 2026 MOU establishes a framework for the two agencies to coordinate rulemaking, information sharing, examinations, and enforcement across areas of overlapping jurisdiction, and expressly includes the development of a "fit-for-purpose regulatory framework for crypto assets and other emerging technologies" as a stated coordination goal. While the 2026 MOU does not create legally binding obligations on either agency, does not resolve the classification of any specific digital asset, and expressly preserves each agency's independent statutory authority, it signals a materially more coordinated regulatory posture between the SEC and the CFTC with respect to digital assets, including cryptocurrencies we may hold such as $IP Tokens. The intensified coordination framework created by the 2026 MOU, including joint rulemaking, data sharing, and coordinated enforcement, could accelerate changes to the regulatory treatment of digital assets we hold and could result in changes to the applicable regulatory framework more quickly than would otherwise be the case. We cannot predict when or in what form any joint or coordinated rulemaking arising from the 2026 MOU will be proposed or finalized, or how any such rules would apply to $IP Tokens or our treasury strategy.

Declines in the broader cryptocurrency market could adversely affect the $IP Token, our business and the value of our digital assets.

The market prices of cryptocurrencies, including $IP Tokens and any others that we may hold or use in connection with our products and services, have historically been subject to extreme volatility. Broad declines in cryptocurrency values, whether due to regulatory developments, macroeconomic conditions, reduced adoption, security breaches, market manipulation, or other factors, could materially and adversely affect demand for our offerings, our financial condition, and the fair value of any digital assets we hold. Sustained or significant downturns in the cryptocurrency market could reduce

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customer activity, impair our ability to raise capital, and lead to write-downs or other non-cash charges, any of which could negatively impact our business and operating results and the trading price of our common stock.

A principal component of our cryptocurrency treasury reserve policy is the acquisition of $IP Tokens, the price of which has been, and will likely continue to be, highly volatile. Our operating results and share price may significantly fluctuate due to the highly-volatile nature of the price of such digital assets and erratic market movements.

In August 2025, we acquired over 53 million $IP Tokens for the establishment of our cryptocurrency treasury operations. Digital assets generally are highly volatile assets. For example, from February 13, 2025 (the date $IP Tokens first became available on digital asset trading platforms) through March 31, 2026, the price of $IP Tokens, as reported by Coinbase.com, ranged from a low of $0.516 to a high of $14.908. In addition, digital assets do not pay interest or returns other than staking rewards and so the ability to generate a return on investment from the net proceeds of any financings will depend on whether there is appreciation in the value of digital assets following our purchases of digital assets with the net proceeds from such financings. We treat the unlocking of tokens via staking on our validator as a form of yield for revenue purposes, consistent with GAAP. Future fluctuations in digital asset trading prices may result in our converting digital assets into cash with a value substantially below the price we paid for such digital assets. If investors perceive our share price as a proxy for $IP Tokens, the lack of a continuous redemption/creation arbitrage can cause persistent, material premiums or discounts to intrinsic value. While staking of $IP Token held by us can generate a return, there is no guarantee a market for staking of $IP Tokens will continue or expand or that the yield on such staking will remain at current levels.

We have engaged, and plan to continue to engage, in derivatives transactions, including for the purpose of generating yield by the sale of covered call options on our $IP Tokens, and such transactions may expose us to material risks that could adversely impact our business, operating results and financial condition.

Derivatives transactions are financial contracts whose value depends on, or is derived from, the price or level of some other underlying product, asset, rate, or index, such as the value of a particular commodity. Derivatives transactions include, but are not limited to, swaps, options and futures. Derivatives transactions may be employed for different purposes, including hedging or mitigating exposure to a particular asset or risk; obtaining or creating investment exposure; and monetizing and generating yield on an existing asset or position.

As discussed above, in September 2025, the Technology and Cryptocurrency Committee of our Board approved our sale of covered call options using less than 2% of the total amount of $IP Tokens we own. This authorization increased to 3 million of our $IP Tokens (approximately 5.6% of our total holdings) in January 2026. By selling such covered call options, we are paid option premiums in exchange for which the option counterparty will obtain the right, but not the obligation, to purchase a specified amount of our $IP Tokens at a designated option strike price. We sold, and expect to continue to sell, call options that can be exercised if the price of the $IP Token in the market reaches a price ranging from 20% to 50% above the $IP Token price at the time the option is sold. In this way, we expect to earn yield through the receipt of option premiums while retaining ownership of the $IP Tokens underlying such options unless the price of the $IP Token in the open market reaches the designated option strike price and the call option is exercised by the buyer. There is no guarantee that engaging in such a covered call option selling strategy will be effective to generate yield or will result in improved overall performance than if we had not engaged in such strategy. Moreover, because these covered call options will grant the option buyers the right to purchase the specified amount of $IP Tokens at the designated strike price, temporary fluctuations in the market price of $IP Tokens could result in us being obligated to sell $IP Tokens in circumstances where our overall strategy would otherwise be to hold and not sell $IP Tokens.

Derivatives transactions, including call option transactions, are complex, carry their own special risks, and may expose us to significant risk of loss. The risks generally associated with derivatives include the risk that: (1) the value of the derivative will change in a detrimental manner; (2) before purchasing a derivative, we will not have the opportunity to observe its performance under all market conditions; (3) counterparty credit risk, in that another party to the derivative (especially where the derivative is entered into on a bilateral or over-the-counter basis) may fail to comply with the terms of the derivative contract; (4) liquidity risk, in that the derivative may be difficult to purchase or sell or we may otherwise encounter difficulties exiting or closing a position; and (5) the derivative may involve leverage, such that adverse changes in the value of the underlying asset could result in a loss substantially greater than the amount invested in the derivative itself or in heightened price sensitivity to market fluctuations.

Our common stock may trade at a substantial premium or discount to the value of the $IP Tokens we hold, and our stock price may be more volatile than the price of $IP Tokens.

The market price of our common stock reflects many factors that do not affect the spot price of $IP Tokens and may therefore diverge materially, positively or negatively, from the per-share value of our $IP Token holdings (net of cash, other assets and liabilities). These factors include, among others: our corporate-level expenses; taxes; the timing, size and

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pricing of equity or debt financings (including at-the-market offerings, equity line financings or convertible securities), equity awards and other sources of dilution; expectations about our future purchases or sales of $IP Tokens or staking activity; our liquidity and public float; differences in trading hours and market microstructure between our common stock and spot markets for $IP Tokens; changes in index inclusion, analyst coverage or investor sentiment toward us as an operating company; our corporate governance, financial reporting, and any actual or perceived operational, custody, technology or regulatory risks specific to us; and broader equity-market conditions independent of crypto-asset markets. As a result, our common stock may trade at a premium or discount to the value of our $IP Token holdings for extended periods, and may be more volatile than the price of $IP Tokens. Accordingly, investors could lose all or a substantial part of their investment even if the market price of $IP Tokens does not decline, and investors in our company may not benefit commensurately from increases in the market price of $IP Tokens.

$IP Tokens and other digital assets are novel assets and are subject to significant legal, commercial, tax, regulatory and technical uncertainty, which could materially adversely affect our financial position, operations and prospects.

$IP Tokens and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws, taxes and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators and tax authorities in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of $IP Tokens or other digital assets, or the revenue derived therefrom.

The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of $IP Tokens or the ability of individuals or institutions such as us to own or transfer $IP Tokens. For example, the U.S. executive branch, the SEC, the European Union’s Markets in Crypto Assets Regulation, among others, have been active in recent years, and in the U.K., the Financial Services and Markets Act 2023 became law. Moreover, on July 18, 2025, President Trump signed into law the GENIUS Act, establishing a legislative framework for the regulation of payment stablecoins and marking the first federal legislation for the regulation of digital assets in the U.S. On July 17, 2025, the U.S. House of Representatives passed the Digital Asset Market Clarity Act of 2025 (the “CLARITY Act”), a comprehensive digital asset market structure and regulation bill. The CLARITY Act, and other digital asset market structure and regulation bills, remain under consideration and continue to evolve in the U.S. Senate. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC, the Commodity Futures Trading Commission (“CFTC”), or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. Changes in administration or legislative priorities can upend permissive or neutral stances toward crypto, stablecoins, staking, or Layer1s apart from $IP, producing sudden compliance burdens or bans. Statutes governing fiat backed stablecoins, digital asset market structure, and custody (including potential CFTC or SEC jurisdictional recuts) could materially alter liquidity, pricing, and our ability to hedge.

It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and $IP Tokens specifically. Enforcement actions against digital asset issuers, trading platforms and staking providers demonstrate shifting, sometimes inconsistent judicial and regulatory approaches. Even where complaints have been narrowed or dismissed, future administrations or courts may take a different view, and previously “safe” assets or strategies may be recharacterized retroactively. Even if we initially comply, later guidance (e.g., on crypto custody, staking, stablecoins, DeFi) could force costly remediation or unwinds. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market price of $IP Tokens and the value of $IP Tokens on our balance sheet and, in turn, adversely affect the market price of our common stock.

Moreover, the risks of engaging in a digital asset treasury strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance, cybercrime insurance or the potential inability to obtain such coverage on acceptable terms in the future.

The growth of the digital assets industry in general, and the use and acceptance of $IP Tokens in particular, may also impact the price of $IP Tokens and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of $IP Tokens may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to $IP Tokens, institutional demand for $IP Tokens as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for $IP Tokens as a means of payment, and the availability and popularity of alternatives to $IP Tokens. Even if growth in the adoption of $IP Tokens occurs in the near or medium-term, there is no assurance that the usage of $IP Tokens will continue to grow over the long-term.

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Because $IP Tokens have no physical existence beyond the record of transactions on the Story Network, a variety of technical factors related to the Story Network could also impact the price of $IP Tokens. For example, malicious attacks by validators, inadequate rewards to incentivize validating of $IP Tokens transactions, hard “forks” of the Story Network into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the Story Network and negatively affect the price of $IP Tokens. Similarly, the open-source nature of the Story Network means the contributors and developers of the Story Network are generally not directly compensated for their contributions in maintaining and developing the blockchain, and any failure to properly monitor and upgrade the Story Network could adversely affect the Story Network and negatively affect the price of $IP Tokens. The veracity or accuracy of third-party validators of the Story Network and its related transactions could come into question, thereby creating doubt in the market about the overall security of the data on the blockchain.

The liquidity of $IP Tokens may also be reduced and damage to the public perception of $IP Tokens may occur, if financial institutions were to deny or limit banking services to businesses that hold $IP Tokens, provide $IP Tokens-related services or accept $IP Tokens as payment, which could also decrease the price of $IP Tokens. A number of companies and individuals or businesses associated with digital assets may have had, and may continue to have, their existing banking services discontinued with financial institutions. Although U.S. banking regulators have recently rescinded prior guidance that emphasized the risks associated with digital asset businesses, it is possible that some banking institutions may remain unwilling to provide services to companies in the digital asset space. Loss of access to fiat rails (after failures of crypto friendly banks or policy shifts) may delay settlements, tax payments, or vendor obligations, impairing liquidity.

The liquidity of $IP Tokens may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for $IP Tokens and other digital assets.

Our shift towards an $IP-focused strategy requires substantial changes in our day-to-day operations and exposes us to significant operational risks.

We operate our own validator on the Story Network and do not “delegate” our $IP Tokens to third party validation service providers. In either case, staking increases the risk of loss of $IP Tokens, including through slashing penalties and through increasing vulnerabilities to hacking in the staking smart contracts. Validators also need to maintain uptime in order to maximize their rewards. In addition, the $IP ecosystem may rapidly evolve, with frequent upgrades and protocol changes that may require significant adjustments to our operational setup. The upgrades and protocol changes may require that we incur unanticipated costs and it could cause temporary service disruptions. Technical failures or operational errors could impact our ability to obtain $IP Token rewards or gas fees, which could result in our failure to meet our financial projections. Alternatively, if we had chosen to use a third-party validation service, we would have had to share our staking rewards with that third-party validator, but that third-party validator may have more sophisticated technology which would enable those rewards to be greater.

Staked $IP Tokens are also subject to lock-up periods during which they cannot be withdrawn or sold. This lack of liquidity could limit our ability to respond to market changes or our financial needs. It is possible that we may in the future seek to mitigate this risk through so-called “liquid staking” arrangements, where we deposit $IP Tokens into a smart contract and receive in exchange a “liquid staking token” that would allow us to withdraw our $IP Tokens and associated rewards. The smart contract would then automatically delegate our $IP Tokens to a third-party staking service provider. We could then engage in other DeFi activities with liquid staking tokens. While we anticipate that the price of liquid staking tokens will correlate to the price of $IP Tokens, there is a possibility that prices will diverge. This could especially happen if the validators deployed by the liquid staking contract are subject to slashing penalties, in which case we may be able to withdraw fewer $IP Tokens than we originally deposited.

Any of these operational risks could materially and adversely affect our ability to execute our $IP Tokens strategy and may prevent us from realizing positive returns and could severely hurt our financial condition.

We plan to purchase additional digital assets using primarily proceeds from equity and debt financings, but we may be unable to obtain such financings on favorable terms.

Our ability to achieve the objectives of our digital asset acquisition strategy depends in significant part on our ability to obtain equity and debt financing. The terms of debt or equity securities that we issue may require us to make periodic payments to the holders of those securities. If we are unable to obtain equity or debt financing on favorable terms or at all, we may not be able to successfully execute on our digital asset acquisition strategy.

Our ability to obtain equity or debt financing may in turn depend on, among other factors, the value of our digital asset holdings, investor sentiment and the general public perception of $IP Tokens and other digital assets, our strategy and

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our value proposition. Accordingly, a significant decline in the market value of our digital asset holdings, our inability to monetize our $IP Tokens through staking or decentralized finance, or a negative shift in these other factors may create liquidity and credit risks, as such a decline or such shifts may adversely impact our ability to secure sufficient equity or debt financing to satisfy our financial obligations, including any debt and cash dividend obligations.

$IP Tokens constitute the vast bulk of assets on our balance sheet. If we are unable to secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell $IP Tokens to satisfy our financial obligations, and we may be required to make such sales at prices below our cost basis or that are otherwise unfavorable. Any such sale of $IP Tokens may have a material adverse effect on our operating results and financial condition, and could impair our ability to secure additional equity or debt financing in the future. Our inability to secure additional equity or debt financing in a timely manner, on favorable terms or at all, or to sell our $IP Tokens in amounts and at prices sufficient to satisfy our financial obligations, including any debt service and cash dividend obligations, could cause us to default under such obligations. Any default on our future indebtedness or any newly issued preferred stock could have a material adverse effect on our financial condition. Such actions could cause significant variation in our operating results in any quarter.

In connection with our focus on $IP Tokens, we expect to interact with various smart contracts deployed on the Story Network, which may expose us to risks and technical vulnerabilities.

In connection with our $IP Token strategy, we expect to interact with various smart contracts deployed on the Story Network in order to optimize our strategy. Smart contracts are self-executing code that operate without human intervention once deployed. Although smart contracts are integral to the functionality of staking deposit contracts and other functionality on blockchain networks, they are subject to many known risks such as technical vulnerabilities, coding errors, security flaws, and exploits. We expect our smart contract interactions to be limited to use of the Story Network’s native staking contract to (i) bond / unbond $IP Tokens that we hold, (ii) manage validator parameters (e.g., commissions on rewards related to delegated tokens), and (iii) receive protocol-defined block rewards and fees. Any vulnerability in a smart contract we interact with could result in the loss or theft of $IP Tokens or other digital assets, which could have a materially adverse impact on our business. A vulnerability in a smart contract could create an unintended and unforeseeable consequence that has adverse financial consequences, such as the inability to access funds. There is no assurance that the smart contracts we integrate with or rely upon will function as intended or remain secure. Exploitation of such vulnerabilities could have a material adverse effect on our business and financial condition.

Transactions using $IP Tokens or on the Story Network require the payment of “gas fees,” which are subject to fluctuations that may result in high transaction fees.

Transactions using $IP Tokens, including purchases, sales and staking and other activities on the Story Network, require the payment of “gas fees” in $IP Tokens. Gas fees are payments made by the user to compensate for the computational energy required to process and validate transactions, such as purchases, sales and staking, on the Story Network. These fees can fluctuate and can be very expensive relative to the cost of the transaction depending upon congestion and demand on the network. If fees are high, the cost of a transaction will potentially decrease the return of the investment, which could be negative. High gas fees may also cause delays in the execution of a transaction, which could affect the preferred timing of execution and may lead to execution of a transaction during inopportune times. In addition, gas fees are paid in $IP Tokens, which would require that sufficient $IP Token balances are maintained. Future upgrades to the Story Network, regulatory changes, or technical issues could also adversely impact the cost of gas fees and could have a material adverse effect on our business, results of operations, financial condition, treasury and prospects.

Changes in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.

The regulatory regime for digital assets in the U.S. and elsewhere is uncertain. We may be unable to effectively react to proposed legislation and regulation of digital assets, which could adversely affect our business.

The Financial Crimes Enforcement Network, a division of the U.S. Treasury Department (“FinCEN”), regulates providers of certain services with respect to “convertible virtual currency,” including $IP Tokens. Businesses engaged in the transfer of convertible virtual currencies are subject to registration and licensure requirements at the U.S. federal level and also under U.S. state laws. There is a risk that if we decide to provide staking services to third parties, FinCEN or other regulators could view such services as the provision of money transmission activities subject to regulations.

If regulatory changes or interpretations require us to register as a money services business with FinCEN under the U.S. Bank Secrecy Act, or as a money transmitter under state laws, we may be subject to extensive regulatory requirements, resulting in significant compliance costs and operational burdens. In such a case, we may incur extraordinary expenses to meet these requirements or, alternatively, may determine that continued operations are not viable. If we decide

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to cease certain operations in response to new regulatory obligations, such actions could occur at a time that is unfavorable to investors.

Multiple states have implemented or proposed regulatory frameworks for digital asset businesses. Compliance with such state-specific regulations may increase costs or impact our business operations. Further, if we or our service providers are unable to comply with evolving federal or state regulations, we may be forced to dissolve or liquidate certain operations, which could materially impact our investors.

There is a possibility that $IP Tokens may be classified as a “security.” If $IP Tokens are classified as a “security,” that would subject us to additional regulation and could materially impact the operations of our treasury strategy and our business.

Neither the SEC nor any other U.S. federal or state regulator has publicly stated whether $IP Tokens constitute a "security," and $IP Tokens have not been formally classified under the U.S. federal securities laws. We note, however, that the 2026 MOU commits the SEC and CFTC to jointly clarifying product definitions through joint interpretations and rulemakings, and to providing a fit-for-purpose regulatory framework for crypto assets. While this commitment to rulemaking could ultimately provide greater clarity, any proposed or final rules arising from this process could also result in classifications or interpretations that are adverse to our position that $IP Tokens are not a "security" within the meaning of the U.S. federal securities laws. Although we believe that $IP Tokens are not a “security,” and that registration of our company or our treasury under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is therefore not required under applicable securities laws, we acknowledge the uncertainty that a regulatory body or federal court may determine otherwise in the future. If this occurs, we may face legal or regulatory action, even if our beliefs were reasonable under the circumstances, and we could be required to register as an investment company under the Investment Company Act.

As part of our ongoing review of applicable securities laws, we take into account a number of factors, including the various definitions of “security” under such laws, including but not limited to the Investment Company Act, and federal court decisions interpreting the elements of these definitions, such as the U.S. Supreme Court’s decisions in the Howey and Reves cases. We also consider court rulings, reports, orders, press releases, public statements, and speeches by the SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction to which a digital asset may relate may be a security for purposes of U.S. federal securities laws. We further consider any guidance, interpretive releases, proposed rules, or final rules issued by the SEC or the CFTC, whether jointly or individually, in connection with the interagency coordination framework established by the 2026 MOU, including any joint interpretation or rulemaking clarifying the classification of crypto assets as securities, commodities, or otherwise. Our position that $IP Tokens are not a “security” is premised, among other reasons, on our conclusion that $IP Tokens do not appear to meet certain elements of the Howey test, such as that holders of $IP Tokens do not have a reasonable expectation of profits from the efforts of any identifiable third party or group in respect of their holding of $IP Tokens.

We acknowledge, however, that the SEC, a federal court or another relevant entity could take a different view. The regulatory treatment of $IP Tokens is such that it has drawn significant attention from legislative and regulatory bodies, including the SEC and the CFTC. The application of securities laws to the specific facts and circumstances of digital assets is complex and subject to change. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a finding that $IP Tokens, or any other digital asset we might hold, are a “security.” In this regard, we note that the 2026 MOU expressly commits the SEC and the CFTC to coordinating enforcement investigations in matters that may involve overlapping jurisdiction, including consulting prior to the issuance of Wells notices or similar instruments, and to filing parallel enforcement actions where practicable. Accordingly, any enforcement investigation by the SEC regarding the classification of $IP Tokens could promptly implicate CFTC involvement, and vice versa, potentially compounding the regulatory exposure associated with any such action. Therefore, as described below under “If we were deemed to be an investment company under the Investment Company Act, applicable restrictions likely would make it impractical for us to continue segments of our business as currently contemplated,” we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders, fines, penalties or other damages if $IP Tokens were determined to be a security by a regulatory body or a court.

Further, if $IP Tokens are viewed as a security, it may become more difficult to purchase and sell $IP Tokens, as they could only be traded through SEC-registered broker-dealers or exchanges. This would make it more difficult for us to continue our $IP treasury strategy, or to monetize $IP Tokens that we hold in the event we need to do so for working capital purposes. Such developments could adversely affect our business, results of operations, financial condition, treasury operations and prospects.

It is still early in the administrative process for the SEC and CTFC review of how each token will be classified and it is yet unclear how $IP Tokens will be viewed while that process is underway or when the final rulemaking is complete. As

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such, it is not possible yet to predict whether $IP Tokens will be classified as securities or commodities and investors are advised to beware of the risk posed by the uncompleted work by the federal agencies in this regard.

The SEC-CFTC Memorandum of Understanding dated March 11, 2026 establishes a framework for heightened interagency coordination on crypto asset regulation and enforcement that could materially affect the regulatory treatment of $IP Tokens and our treasury strategy.

On March 11, 2026, the SEC and the CFTC entered into the 2026 MOU, which establishes a broad framework for harmonization, coordination, and information sharing between the two agencies across areas of common regulatory interest. The 2026 MOU supersedes the prior SEC-CFTC MOU dated July 11, 2018. Among its stated goals, the 2026 MOU expressly includes the development of a "fit-for-purpose regulatory framework for crypto assets and other emerging technologies," to be achieved in part through joint interpretations and rulemakings clarifying product definitions and through coordination to remove obstacles to the lawful introduction of novel crypto asset products to market participants. The 2026 MOU also establishes enhanced mechanisms for information sharing between the agencies, coordinated examinations of dually-regulated entities, and parallel enforcement in matters of overlapping jurisdiction.

Although the 2026 MOU does not create legally binding obligations on either agency, does not supersede any applicable laws or regulations, and does not resolve the classification of any specific digital asset — including $IP Tokens — as a security or commodity, the coordination framework it establishes has several implications material to our business and treasury strategy. First, to the extent the SEC and CFTC undertake joint rulemaking or issue joint interpretive guidance on the classification of crypto assets pursuant to the 2026 MOU, any such guidance could affect the regulatory status of $IP Tokens in ways we cannot currently predict, and could result in changes to our obligations under federal securities or commodities laws. Second, the 2026 MOU's enforcement coordination provisions — under which the agencies commit to consulting on matters involving potential overlapping jurisdiction, including prior to issuance of Wells notices, and to filing parallel actions where practicable — increase the risk that any regulatory inquiry by one agency would promptly involve the other, potentially compounding our regulatory exposure. Third, the 2026 MOU's data sharing provisions, under which the agencies agree to share information concerning matters of common regulatory interest, including information pertaining to dually-regulated entities and novel crypto asset products, could result in information about our company, our $IP Token holdings, or our transactions being shared between the agencies in connection with any examination or enforcement matter.

The 2026 MOU also reflects the agencies' stated commitment to a "minimum effective dose" regulatory strategy and to "fair notice" principles, and expressly rejects "regulating through enforcement." While these principles, if implemented consistently, could be favorable to companies like ours that have sought in good faith to comply with applicable law, these principles do not constitute legally binding commitments, do not limit either agency's authority to bring enforcement actions, and do not resolve existing legal uncertainty regarding the classification of $IP Tokens. We continue to monitor developments under the 2026 MOU, including any proposed rulemakings, interpretive releases, or joint guidance issued by the SEC and CFTC pursuant thereto, but cannot predict the ultimate outcome of this regulatory process or its effects on our business, financial condition, treasury strategy, or the market price of our common stock.

If we were deemed to be an investment company under the Investment Company Act, applicable restrictions likely would make it impractical for us to continue segments of our business as currently contemplated.

Under Sections 3(a)(1)(A) and (C) of the Investment Company Act, a company generally will be deemed to be an “investment company” if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) on an unconsolidated basis. Rule 3a-1 under the Investment Company Act generally provides that notwithstanding the Section 3(a)(1)(C) test described in clause (ii) above, an entity will not be deemed to be an “investment company” for purposes of the Investment Company Act if no more than 45% of the value of its assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities, as defined under the Investment Company Act (“40 Act Securities”), other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled primarily by such entity. We do not believe that we are an “investment company” as such term is defined in either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the Investment Company Act.

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With respect to Section 3(a)(1)(A) of the Investment Company Act, a substantial majority of the proceeds from our recent private placement offering of pre-funded warrants have been used to acquire $IP Tokens, which is an amount in excess of 40% of our total assets. We believe $IP Tokens are not a 40 Act Security; as such, we do not hold ourselves out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting, or trading in 40 Act Securities within the meaning of Section 3(a)(1)(A) of the Investment Company Act. With respect to Section 3(a)(1)(C) of the Investment Company Act, we believe we satisfy the elements of Rule 3a-1 and therefore are deemed not to be an investment company under, and we intend to conduct our operations such that we will not be deemed an investment company under, Section 3(a)(1)(C). We believe that we are not an investment company pursuant to Rule 3a-1 under the Investment Company Act because, on a consolidated basis with respect to wholly-owned subsidiaries but otherwise on an unconsolidated basis, no more than 45% of the value of our total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) consists of, and no more than 45% of our net income after taxes (for the last four fiscal quarters combined) is derived from, 40 Act Securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, securities issued by employees’ securities companies, securities issued by qualifying majority-owned subsidiaries of our company, and securities issued by qualifying companies that are controlled primarily by the Company.

$IP Tokens and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive questions under the Investment Company Act. There is a risk that assets or arrangements that we have concluded are not securities could be deemed to be securities by the SEC or another authority for purposes of the Investment Company Act, which would increase the percentage of 40 Act Securities held by us for Investment Company Act purposes. If we were deemed to be an investment company, Rule 3a-2 under the Investment Company Act is a safe harbor that provides a one-year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding or trading in securities, with such intent evidenced by the company’s business activities and an appropriate resolution of its board of directors. The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Accordingly, the grace period may not be available at the time that we seek to rely on Rule 3a-2; however, Rule 3a-2 is a safe harbor and we may rely on any exemption or exclusion from investment company status available to us under the Investment Company Act at any given time. Furthermore, reliance on Rule 3a-2, Section 3(a)(1)(C), or Rule 3a-1 could require us to take actions to dispose of securities, limit our ability to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations. If we were to be deemed an investment company in the future, restrictions imposed by the Investment Company Act, including limitations on our ability to issue different classes of stock and equity compensation to directors, officers, and employees and restrictions on management, operations, and transactions with affiliated persons, likely would make it impractical for us to continue our business as contemplated, and could have a material adverse effect on our business, results of operations, financial condition, treasury and prospects.

If the SEC determines that we are an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would potentially be unable to enforce contracts with third parties and that third parties could seek to obtain rescission of transactions undertaken during the period for which it was established that we were an unregistered investment company. There is also a risk the SEC or Nasdaq could move to delist us from the exchange.

The availability of spot exchange-traded products (“ETPs”) for digital assets may adversely affect the market price of our listed securities.

Although bitcoin and other digital assets have experienced a surge of investor attention since bitcoin was invented in 2008, until recently investors in the United States had limited means to gain direct exposure to digital assets through traditional investment channels, and instead generally were only able to hold digital assets through “hosted” wallets provided by digital asset service providers or through “unhosted” wallets that expose the investor to risks associated with loss or hacking of their private keys. Given the relative novelty of digital assets, general lack of familiarity with the processes needed to hold digital assets directly, as well as the potential reluctance of financial planners and advisers to recommend direct digital asset holdings to their retail customers because of the manner in which such holdings are custodied, some investors have sought exposure to digital assets through investment vehicles that issue shares representing fractional undivided interests in their underlying digital asset holdings.

On January 10, 2024, the SEC approved the listing and trading of spot bitcoin ETPs, the shares of which can be sold in public offerings and are traded on U.S. national securities exchanges. The SEC has also approved spot ETPs for

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Ethereum and other digital assets. The listing and trading of spot ETPs for digital assets offers investors another alternative to gain exposure to digital assets, which could result in a decline in the price of our listed securities relative to the value of our digital assets.

Although we are an operating company, and we believe we offer a different value proposition than an investment vehicle such as a spot digital asset ETP, investors may nevertheless view our securities as an alternative to an investment in an ETP, and choose to purchase shares of an ETP instead of our securities. They may do so for a variety of reasons, including if they believe that ETPs offer a “pure play” exposure to digital assets that is generally not subject to federal income tax at the entity level as we are, or the other risk factors applicable to an operating business, such as ours. Additionally, unlike spot digital asset ETPs, we (i) do not seek for our common stock to track the value of the underlying digital assets we hold before payment of expenses and liabilities, (ii) do not benefit from various exemptions and relief under the Securities Exchange Act of 1934, as amended, including Regulation M, and other securities laws, which enable ETPs to continuously align the value of their shares to the price of the underlying assets they hold through share creation and redemption, (iii) are a Delaware corporation rather than a statutory trust, and do not operate pursuant to a trust agreement that would require us to pursue one or more stated investment objectives, and (iv) are not required to provide daily transparency as to our digital asset holdings or our daily NAV. Based on how we are viewed in the market relative to ETPs, and other vehicles which offer economic exposure to digital assets, such as futures exchange-traded funds (“ETFs”), leveraged futures ETFs, and similar vehicles offered on international exchanges, any premium or discount in our common stock relative to the value of our digital asset holdings may increase or decrease in different market conditions.

As a result of the foregoing factors, availability of spot ETPs for bitcoin and other digital assets could have a material adverse effect on the market price of our listed securities.

We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.

Mutual funds, exchange-traded funds and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of or changes to our digital asset treasury strategy, our use of leverage, the manner in which our digital assets are custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. For example, although a significant change to our treasury reserve policy would require the approval of our Board of Directors, no stockholder or regulatory approval would be necessary. Consequently, our Board of Directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our $IP Token holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding digital assets.

Legislative or regulatory change regarding the regulation of “commodities” by the CFTC and the regulation of digital assets as “digital commodities” could subject us to additional regulatory burdens and oversight by the CFTC and could adversely affect the market price of $IP Tokens and the market price of our listed securities.

The CFTC has stated and judicial decisions involving CFTC enforcement actions have confirmed that at least some digital assets fall within the definition of a “commodity” under the U.S. Commodities Exchange Act of 1936 (the “CEA”) and the rules promulgated by the CFTC thereunder (“CFTC Rules”). While the CFTC has enforcement authority to police against fraud and manipulation in spot commodity markets (including the spot market for digital assets that are commodities), the CFTC currently only has regulatory and supervisory jurisdiction with respect to “commodity interest” transactions, such as futures, options, and swaps on a commodity (including a digital asset commodity) and certain leveraged, margined, or financed transactions in commodities involving retail customers. Accordingly, we are not currently regulated or supervised by the CFTC and are not subject to the legal and regulatory obligations that are applicable to CFTC-registered entities under the CEA and CFTC Rules.

As discussed above, the regulation of digital assets in the U.S. is subject to change as a result of the enactment and adoption of new laws and regulations and changes in agency and judicial interpretation of existing laws and regulations. For example, the proposed CLARITY Act and other draft digital asset market structure and regulation bills have proposed granting the CFTC additional regulatory and supervisory powers with respect to spot digital assets as “digital commodities.” In addition, on March 11, 2026, the SEC and CFTC entered into the 2026 MOU, which establishes a framework for the two agencies to coordinate on the development of a "fit-for-purpose regulatory framework for crypto assets and other emerging technologies," including through joint interpretations and rulemakings clarifying product definitions. To the extent such joint rulemaking addresses the circumstances under which a digital asset constitutes a "commodity" or "digital commodity" subject to expanded CFTC jurisdiction, rather than a "security" subject to SEC

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jurisdiction, such guidance could have direct implications for $IP Tokens and our treasury strategy. Moreover, the 2026 MOU expressly contemplates coordination by the agencies on proposals to list or trade novel crypto asset products and on enforcement actions that could adversely impact markets or products under common jurisdiction, further increasing the practical scope of CFTC involvement in matters affecting $IP Tokens. While it is not possible to predict whether and in what form such proposals will be adopted or how any joint rulemaking under the 2026 MOU will ultimately characterize $IP Tokens, changes to or expansion of the jurisdiction of the CFTC with respect to activities in spot digital assets, including $IP Tokens, could result in the imposition of additional regulatory obligations and burdens, which could include registration, disclosure, reporting, and business conduct requirements. Such additional regulatory burdens and oversight could materially increase the cost of our business, could adversely affect the market price of $IP Tokens, and in turn could adversely affect the market price of our listed securities.

We may be deemed to be a “commodity pool” under CEA and CFTC Rules as a result of our commodity interest trading, which could have a material adverse effect on our business, financial condition and results of operations.

The CEA and CFTC Rules define a “commodity pool” as any investment trust, syndicate, or similar form of enterprise operated for the purpose of trading in “commodity interests,” such as swaps, futures, and options on an underlying commodity (including any digital asset that constitutes a commodity). The CFTC has previously interpreted “for the purpose of trading” as being triggered where only one swap is executed. The legal and regulatory landscape of CFTC commodity pool regulation is currently unclear as applied to digital asset treasury companies. Accordingly, (i) no person is registered with the CFTC as a commodity pool operator (“CPO”) or a commodity trading adviser (“CTA”) with respect to our company; and (ii) our stockholders will not have the regulatory protections provided to investors in a commodity pool operated or advised by a registered CPO or CTA, as applicable.

If our company were determined to be a “commodity pool,” including as a result of any future change in legislation, regulation, or interpretation, we may be subject to additional regulatory requirements which may be burdensome or costly or that could make it impractical or impossible for us to continue our business as currently contemplated. For example, a commodity pool must generally be operated as a separately cognizable entity from its CPO and any person acting as a CPO or CTA with respect to a commodity pool must be registered with the CFTC and as a member of the National Futures Association (“NFA”). Absent an applicable exemption, a registered CPO or CTA must generally provide investors with a “disclosure document” in compliance with the CFTC Rules and the requirements of the NFA, and must comply with a range of ongoing reporting and recordkeeping requirements on registered and certain exempt commodity pool operators. Registration can be time-consuming, expensive and restrictive, and compliance with these additional regulatory requirements could result in substantial, non-recurring expenses, adversely affecting an investment in our securities. If we determine not to comply with such regulations, we may be forced to cease or modify certain of our operations, which could negatively impact our investors. We also note that the 2026 MOU establishes enhanced information sharing between the SEC and CFTC with respect to entities, products, and markets of common regulatory interest, including investment companies and commodity pools that may be subject to overlapping jurisdiction. The 2026 MOU defines "Covered Firms" to include, among others, firms registered as both Investment Advisers and Commodity Pool Operators. While we are not currently so registered, the enhanced surveillance, data sharing, and coordinated examination framework established by the 2026 MOU means that the CFTC's visibility into our operations and holdings could increase, and that any examination or inquiry by the SEC could more readily prompt CFTC scrutiny of whether we constitute a commodity pool, or vice versa. This increased interagency coordination could reduce the practical barriers to a determination that we are a commodity pool and compound the regulatory consequences of any such determination.

Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, digital asset trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect the value of digital assets, and our financial position, operations and prospects.

Cryptocurrency markets, including spot markets for $IP Tokens, are growing rapidly. The digital asset trading platforms through which $IP Tokens and other cryptocurrencies trade are new and largely unregulated or may not be complying with existing regulations. These markets are local, national and international and include a broadening range of cryptocurrencies and participants. Significant trading may occur on systems and platforms with minimum predictability. Spot markets may impose daily, weekly, monthly or customer-specific transactions or withdrawal limits or suspend withdrawals entirely, rendering the exchange of $IP Tokens for fiat currency difficult or impossible. Participation in spot markets requires users to take on credit risk by transferring $IP Tokens from a personal account to a third-party’s account.

Digital asset trading platforms may not be subject to, or may not comply with, regulations in a manner similar to other regulated trading platforms, such as national securities exchanges or designated contract markets. Many digital asset trading platforms are unlicensed, are unregulated, operate without extensive supervision by governmental authorities, and

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do not provide the public with significant information regarding their ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance. In particular, those located outside the United States may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions. Digital asset trading platforms may be out of compliance with existing regulations.

As a result, trading activity on or reported by these digital asset trading platforms is generally significantly less regulated than trading in regulated U.S. securities and commodities markets and may reflect behavior that would be prohibited in regulated U.S. trading venues. Furthermore, many digital asset trading platforms lack certain safeguards put in place by more traditional exchanges to enhance the stability of trading on the platform and prevent flash crashes, such as limit-down circuit breakers. As a result, the prices of cryptocurrencies such as $IP Tokens on digital asset trading platforms may be subject to larger and/or more frequent sudden declines than assets traded on more traditional exchanges. Tools to detect and deter fraudulent or manipulative trading activities (such as market manipulation, front-running of trades, and wash-trading) may not be available to or employed by digital asset trading platforms or may not exist at all. As a result, the marketplace may lose confidence in, or may experience problems relating to, these venues.

No digital asset trading platform on which cryptocurrency trades is immune from these risks. The closure or temporary shutdown of digital asset trading platforms due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in cryptocurrency and can slow down the mass adoption of it. Further, digital asset trading platform failures can have an adverse effect on cryptocurrency markets and the price of cryptocurrency and could therefore have a negative impact on the performance of our listed securities.

Negative perception, a lack of stability in the digital asset trading platforms, manipulation of cryptocurrency trading platforms by customers and/or the closure or temporary shutdown of such trading platforms due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in cryptocurrency generally and result in greater volatility in the market price of $IP Tokens and other cryptocurrency and our listed securities. Furthermore, the closure or temporary shutdown of a cryptocurrency trading platform may impact the Company’s ability to determine the value of its cryptocurrency holdings.

Digital asset holdings are less liquid than cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Historically, the digital asset market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, thin order books on smaller venues, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, including momentum pricing and “short squeezes,” compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network, any of which may cause severe drawdowns that materially impair our equity value. During times of market instability, we may not be able to sell our digital assets at favorable prices or at all. Large holders (including Story Foundation, venture capitalists, or early insiders) could sell into thin liquidity, significantly impacting price. Companies financing crypto acquisitions with layered convertibles, preferred stock or margin loans face liquidity squeezes, forced sales, or dilutive recapitalizations if equity prices or token prices fall. As a result, digital asset holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered digital assets or otherwise generate funds using our digital asset holdings, including in particular during times of market instability or when the price of digital assets has declined significantly. If we are unable to sell our digital assets, enter into additional capital raising transactions, including capital raising transactions using $IP Tokens as collateral, or otherwise generate funds using our $IP Tokens holdings, or if we are forced to sell our digital assets at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

Transacting in digital assets exposes us to counterparty credit risk.

We may transact with private counterparties or on digital asset exchanges. We are required to prefund these transactions, which causes us to take on credit risk every time we purchase or sell digital assets, and our contractual rights with respect to such transactions could be limited. Our agreements with our contractual counterparties may not include provisions sufficient to clarify that the assets associated with our prefunded trades remain our property even when held by the counterparty, and in the event of an insolvency of one of our counterparties it is possible that any digital assets or cash that we have prefunded could be viewed as part of their bankruptcy estate, leaving us in the status of an unsecured creditor as discussed below under “We face risks relating to the custody of our digital assets, including the loss or destruction of private keys required to access our digital assets and cyberattacks or other data loss relating to our digital assets, including smart contract related losses and vulnerabilities.”

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Although we are not initially planning to lend $IP Tokens, from time to time, we may generate income through lending of digital assets, which carries significant risks. The volatility of such digital assets increases the likelihood that borrowers may default due to market downturns, liquidity crises, fraud or other financial distress. These lending transactions may be unsecured, and so may be subordinated to secured debt of the borrower. If a borrower becomes insolvent, we may be unable to recover the loaned $IP Tokens, leading to substantial financial losses.

Additionally, digital asset lending platforms are vulnerable to operational and cybersecurity risks. Technical failures, software bugs or system outages could disrupt lending activities, delay transactions or result in inaccurate record-keeping. Cybersecurity threats, including hacking, phishing and other malicious attacks, pose further risks, potentially leading to the loss, theft or misappropriation of our loaned $IP Tokens. A successful cyberattack or security breach could materially and adversely impact our financial position, reputation and ability to conduct future lending activities.

Cybersecurity risks associated with digital assets and decentralized protocols could result in significant losses.

Digital assets are secured by “private keys” which correspond to a “public key,” which is the address on the digital asset network. In order to transfer digital assets from one wallet to another, the user must “sign” the transaction with the relevant private key. The storage for these private keys is typically referred to as a “wallet.” To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, we will be unable to access the digital assets held in the related digital wallet. Furthermore, we cannot provide assurance that our digital wallets, nor the digital wallets that any custodians may hold on our behalf, will not be compromised as a result of a cyberattack. Blockchain ledgers have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.

As part of our treasury management strategy, we may engage in staking, restaking, or other activities that involve the use of “smart contracts” or decentralized applications. The use of smart contracts or decentralized applications entails certain risks including risks stemming from the existence of an “admin key” or coding flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the smart contract or decentralized application, potentially leading to a loss of our $IP Tokens. In addition, many decentralized applications are controlled by token holders through a public governance process, and there can be no assurance that these applications will continue to operate as they do when we initially begin using them. Like all software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the contract or decentralized application. Smart contracts and decentralized applications may contain bugs, security vulnerabilities or poorly designed permission structures that could result in the irreversible loss of $IP Tokens or other digital assets. Exploits, including those stemming from admin key misuse, admin key compromise, or protocol flaws, have occurred in the past and may occur in the future.

Intellectual property disputes related to the open-source structure of digital asset networks exposes us to risks related to software development, security vulnerabilities and potential disruptions to digital asset technology could threaten our ability to operate.

Digital asset networks are open-source projects and, although there may be an influential group of leaders in the network community, generally there is no official developer or group of developers that formally controls the digital asset network. Without guaranteed financial incentives, there may be insufficient resources to address emerging issues, upgrade security or implement necessary improvements to the network in a timely manner. If the digital asset network’s software is not properly maintained or developed, it could become vulnerable to security threats, operational inefficiencies and reduced trust, all of which could negatively impact the digital assets’ long-term viability and our business.

The lack of legal recourse and insurance for digital assets increases the risk of total loss in the event of theft or destruction.

Digital assets that we acquire will not be insured against theft, loss or destruction. If an event occurs where we lose our digital assets, whether due to cyberattacks, fraud or other malicious activities, we may not have any viable legal recourse or ability to recover the lost assets. Unlike funds held in insured banking institutions, our digital assets are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. If our digital assets are lost under circumstances that render another party liable, there is no guarantee that the party responsible will have the financial resources to compensate us. As a result, we and our stockholders could face significant financial losses.

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We face risks relating to the custody of our digital assets, including the loss or destruction of private keys required to access our digital assets and cyberattacks or other data loss relating to our digital assets, including smart contract related losses and vulnerabilities.

We currently hold our digital assets in “self-custody,” which means our digital assets are held in wallets in which we control the private keys, as compared to solutions in which the keys are controlled by a regulated custodian. Self-custody requires us and our advisers to implement robust security measures to protect our digital assets from theft, loss, or unauthorized access. We maintain a number of security measures to manage and protect the keys for our digital asset wallets, including, but not limited to, the use of cold wallets, multi-signature protocols, access limited to select senior executives and experienced advisors, and various physical safeguards such as geographically dispersed multisig holders across North America. Despite these measures, there is no guarantee that we will be able to prevent all security breaches, which could result in significant financial loss. The management of digital assets through self-custody necessitates specialized knowledge and expertise. Any errors or failures in our self-custody processes, such as the loss of private keys or incorrect transaction execution, could lead to the permanent loss of digital assets.

We intend to enter into custodial agreements with one or more regulated custodians that have duties to safeguard the private keys used to transact in our digital assets. Prior to our transfer of our digital assets to custodial accounts, we will be subject to risks associated with self-custody, including the risks that our security controls will be insufficient to protect the digital assets that we hold. However, the use of digital asset custodians also may involve risks, as described under “The use of digital asset custodians could expose us to additional risks related to custodian insolvency, as well as cybersecurity and concentration risk.”

Cybercriminals may attempt to deceive individuals into revealing sensitive information, such as private keys or passwords, through phishing emails or social engineering tactics. These attacks can be sophisticated and difficult to detect, posing a significant risk to the security of self-custodied digital assets. Devices used for self-custody, such as computers or smartphones, can be targeted by malware or hacking attempts designed to gain unauthorized access to digital assets. Finally, mistakes made by individuals managing self-custodied digital assets, such as sending assets to the wrong address or mishandling private keys, can result in significant losses. Because transactions on blockchains such as the Story Network are irreversible, such a mistransmission of digital assets could result in permanent loss.

Even though we maintain cyber risk insurance, this insurance may not be sufficient to cover all our losses in the event of any loss of digital assets. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles.

Attacks upon systems across a variety of industries, including the digital asset industry, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. In the past, hackers have successfully employed social engineering attacks resulting in misappropriation of digital assets held by various digital asset treasury companies. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements since the onset of the COVID-19 pandemic. The risk of cyberattacks could also be increased by cyberwarfare in connection with geopolitical conflicts, such as the ongoing Russia-Ukraine conflict, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the digital asset industry, including third-party services on which we rely, could materially and adversely affect our business.

The use of digital asset custodians could expose us to additional risks related to custodian insolvency, as well as cybersecurity and concentration risk.

While we will conduct due diligence on our custodians and any smart contract platforms we may use, there can be no assurance that such diligence will uncover all risks, including operational deficiencies, hidden vulnerabilities or legal noncompliance. The large volumes of digital assets held by custodial platforms makes them an attractive target for hackers.

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For example, the digital asset exchange ByBit was recently the subject of a hack in which over $1.5 billion of customer digital assets were lost. While ByBit was able to make all of its customers whole through use of reserves and insurance policies, there is no contractual guarantee that our custodians will do the same. We intend to contract with custodians whose insurance policies cover losses of digital assets, but these policies may cover only a fraction of the value of the entirety of our digital asset holdings and the holdings of their other customers, and there can be no guarantee that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect to our digital assets.

If we engage third-party custodians to hold our digital assets, this will expose us to the risk that one or more of our custodians could become subject to insolvency proceedings. Applicable insolvency law is not fully developed with respect to the holding of digital assets in custodial accounts, but it is possible that a bankruptcy court or trustee could take the view that we are a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such digital assets. For example, a bankruptcy court in Delaware ruled on July 18, 2025 that the digital assets held by Prime Trust LLC, a Nevada trust company and a subsidiary of Prime Core Technologies Inc., on behalf of users would be distributed proportionately to all unsecured creditors as such assets were part of the debtors’ bankruptcy estate because of commingling between customer accounts and those of the debtors. This exposes us to the risk that a bankruptcy court might take a similar view in connection with a bankruptcy of one of our custodians, and that our claims on our digital assets might be limited to those of an unsecured creditor.

Any contested bankruptcy claim could result in significant delays in our ability to access our digital assets, and any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage that we might purchase or maintain related to our digital assets. Digital assets we hold with custodians and transact with our trade execution partners does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Thus, in the event of an insolvency of one of our custodians, we will also not be protected by these schemes.

We will face risks relating to the custody of our digital assets. If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital assets, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.

We expect our primary counterparty risk with respect to our $IP Tokens will be custodian performance obligations under the custody arrangements we enter into. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, SEC enforcement actions against other providers, or placement into receivership or civil fraud lawsuit against digital asset industry participants have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading.

Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our $IP Tokens holdings, we would become subject to additional counterparty risks. We will need to carefully evaluate market conditions, including price volatility as well as service provider terms and market reputations and performance, among others, prior to implementing any such strategy, all of which could affect our ability to successfully implement and execute on any such future strategy. These risks, along with any significant non-performance by counterparties, including in particular the custodian or custodians with which we will custody substantially all of our $IP Tokens, could have a material adverse effect on our business, prospects, financial condition, and operating results.

The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.

Digital asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on that digital asset network. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft.

Although we plan to regularly transfer digital assets to or from vendors, consultants and services providers, it is possible that, through computer or human error, or through theft or criminal action, such assets could be transferred in incorrect amounts or to unauthorized third parties.

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To the extent we are unable to seek a corrective transaction to identify the third party which has received our digital assets through error or theft, we will be unable to revert or otherwise recover the impacted digital assets, and any such loss could adversely affect our business, results of operations and financial condition.

We are subject to significant competition in the growing digital asset industry and our business, operating results, and financial condition may be adversely affected if we are unable to compete effectively.

In carrying out our digital asset treasury strategy, we operate in a competitive environment and will compete against other companies and other entities with similar strategies, including companies with significant holdings in $IP Tokens and other digital assets, and our business, operating results, and financial condition may be adversely affected if we are unable to compete effectively.

As seen in other crypto treasury models, continued issuance of debt or equity to buy more tokens can become self-reinforcing, until market sentiment turns, at which point liquidity may evaporate, causing distressed financings or forced liquidations. As more public companies pursue token reserve business models, investors may discount our equity unless we can demonstrate durable competitive advantages, risk controls, and sustainable economics. The continued development, security, and governance of the Story Protocol may depend on a small number of contributors or a foundation. Loss of these contributors, or strategic disagreements (including over forks), could impair $IP Token’s value.

The emergence or growth of other digital assets, including those with significant private or public sector backing, including by governments, consortiums or financial institutions, could have a negative impact on the price of $IP Tokens and adversely affect our securities.

As a result of our $IP Tokens strategy, we expect our assets to be concentrated in $IP Tokens holdings. Accordingly, the emergence or growth of digital assets other than $IP Tokens may have a material adverse effect on our financial condition.

Alternative digital assets that compete with $IP Tokens in certain ways include “stablecoins,” which are designed to maintain a constant price related to or based on some other asset or traditional currency because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. In June 2025, the U.S. Senate passed the “GENIUS Act,” which would establish a federal framework for “payment stablecoins,” treating them as payment systems, not securities, and mandating fiat-backed reserves, monthly disclosures, anti-money laundering safeguards, and similar measures. Stablecoins have grown rapidly as an alternative to $IP Tokens and other digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms, and their use as an alternative to $IP Tokens could expand further if the GENIUS Act is enacted as law. As of July 31, 2025, two of the seven largest digital assets by market capitalization were U.S. dollar-pegged stablecoins.

Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, China’s central bank digital currency (“CBDC”) project was made available to consumers in January 2022, and governments including the United States, the United Kingdom, the European Union, and Israel have been discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, $IP Tokens and other digital assets as a medium of exchange or store of value.

Finally, a number of other blockchain-based or digital asset-oriented protocols also function as intellectual property rights management systems, including Audius, LBRY and Royal.io. The emergence or growth of competitive digital assets could cause the market price of $IP Tokens to decrease, which could have a material adverse effect on our business, prospects, financial condition, and operating results.

We may be subject to risks associated with the provision and use of validator services.

In connection with our proposed activities regarding the Story Protocol (as defined below), we will operate a validator to secure the network, and other users can delegate their $IP Tokens to our validator. In the past, the SEC has asserted that the offering of validator services to third parties constitutes an offer to the public of unregistered securities. While the SEC has recently released a statement stating that, in the views of its Division of Trading and Markets, it will not consider staking and the provision of validator services to constitute an offering of securities, this statement is not a rule, regulation, guidance, or statement of the SEC and does not alter applicable law.

Concentration of stake or validator collusion could censor transactions, cause chain reorganizations, or enable double spends, potentially irreversibly impairing the value of $IP Tokens. If we choose to operate our own validator or delegate or

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$IP Tokens to another validator, we may suffer slashing or forfeiture of rewards due to downtime, misconfiguration, or malicious software, materially reducing the value of our treasury holdings.

Complex valuation controls and benchmark dependence may lead to restatements or control deficiencies.

Reliance on third-party reference rates, principal market determinations or bespoke methodologies introduces risk if those benchmarks are disrupted, manipulated, or fail benchmark principles set by the International Organizational of Securities Commissions. Net asset value or fair value determinations of our $IP Tokens could be challenged, leading to restatements or control deficiencies with respect to our financial statements.

Fair value, complex custody arrangements, staking reward recognition, fork/airdrop accounting, and tax characterization increase the risk of material weaknesses, in our accounting controls and procedures, restatements of our financial statements, and adverse auditor opinions, all of which could potentially impair our access to capital markets and adversely affect our business and financial condition and the market price of our common stock.

The Story Network is a relatively new protocol and could be subject to risks inherent in new technologies.

The Story Network is a purpose-built layer 1 blockchain designed to allow owners of intellectual property to register their ownership on-chain and add usage terms for licensees. This functionality is new and may not function as intended. For example, its technical mechanisms designed to represent and enforce digital intellectual property rights may malfunction or otherwise fail to adhere to the unique intellectual property requirements of the content they are intended to administer. In addition, there may be flaws in the cryptography underlying the Story protocol including flaws that affect functionality of the Story Network or make the network vulnerable to attack. The development of the Story Network is ongoing and any disruption could have a material adverse effect on the value of IP and an investment in the Shares. In addition, the Story Protocol’s smart contract-based intellectual property rights management may not be recognized by courts or regulators. For instance, registering authorship or licensing rights on the Story Network does not constitute formal registration with the U.S. Copyright Office or any analogous body in other jurisdiction. Finally, there can be no absolute assurance that persons registering and monetizing intellectual property on the Story Network are the actual owners of such intellectual property. This could lead to disputes, claims or litigation involving intellectual property rights. While there are internal processes to prevent such issues, it is incumbent upon the applications to adopt such processes, and the failure to do so may adversely affect the value and or the use of the $IP Token and the platform as a whole. Any of the foregoing could result in decreased adoption of the Story Protocol.

$IP Token-based applications may rely on off chain data, cross chain bridges, or composable contracts, all of which have shown high exploit frequency. The Story Protocol’s claims about enforceable intellectual property licenses could conflict with national intellectual property laws, treaty obligations, or public policy, and invite litigation or regulatory scrutiny that depresses adoption of the Story Protocol.

The Story Protocol relies on active engagement by users to function and decentralize, and such engagement is key to driving the value of $IP Tokens, and any failure to achieve adoption could undermine the core value proposition of $IP Tokens, thus causing their price to decrease. Story Protocol changes, contentious forks, or airdrops can create legal, tax, accounting, and operational uncertainty. We may forego, abandon or be unable to claim certain forked assets, leading to opportunity cost or disputes over entitlement.

Because of the pseudonymous nature of blockchain transactions, we may inadvertently and without knowledge, directly or indirectly engage in transactions with or for the benefit of prohibited persons under U.S. or foreign sanctions laws.

We are subject to the rules enforced by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), including prohibitions on conducting direct or indirect business with persons named on, or owned by persons named on, OFAC’s various sanctions lists, including the Specially Designated Nationals and Blocked Persons list. We are also prohibited from direct or indirect dealings with persons located in, organized in, or nationals of, jurisdictions subject to U.S. embargos (as of today, Cuba, Iran, North Korea, Syria, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, and the Crimea region of Ukraine), and may be prohibited from dealing with persons in other jurisdictions subject to targeted U.S. sanctions such as Venezuela, Russia, and Belarus. U.S. sanctions compliance obligations apply to transactions in digital assets and U.S. sanctions authorities have in recent years directed significant attention to sanctions compliance among the digital asset industry. Because of the pseudonymous nature of blockchain transactions and decentralized applications, we may inadvertently and without knowledge, directly or indirectly engage in transactions with or for the benefit of prohibited persons, especially when engaging in defi activities where it may be impossible for us to determine the identity of our counterparties. Civil liability for OFAC sanctions violations are typically regarded as “strict liability” violations, meaning we may be held responsible for transacting with prohibited parties even if we have no knowledge that a particular counterparty is a prohibited person under the OFAC sanctions regulations. In

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addition, we may be subject to non-U.S. economic sanctions laws and regulations to the extent we conduct activity within the jurisdiction of other sanctions regimes, including those of the European Union and United Kingdom.

OFAC and other governmental authorities have significant discretion in the interpretation and enforcement of sanctions laws and regulations. Moreover, economic sanctions laws and regulations continue to evolve, often with little or no notice, which could raise operational or compliance challenges. If it is determined that we have transacted with prohibited persons, even inadvertently, this could result in substantial reputational harm, fines or penalties, and costs associated with governmental inquiries and investigations. Any or all of the foregoing could have a material adverse effect on our business, prospects, operations or financial condition.

We may be subject to securities or corporate governance litigation, which is expensive and could divert our management’s attention.

Stockholders, token purchasers, protocol participants, or IP rights holders could bring claims alleging securities violations, misstatements, IP infringement, or governance misconduct, potentially resulting in material damages, rescission, or injunctive relief. It could be alleged that by holding $IP Tokens or using $IP Tokens to vote on governance proposals in relation to the Story Protocol, the holders of $IP Tokens, including our Company, have entered into a general partnership, unincorporated association, or some other form of legal entity or association with other $IP Token holders or a group of such holders. If this were to be found or alleged with respect to the Story Protocol and holders of $IP Tokens, we could be held responsible for the actions of the other members of the unincorporated association or general partnership, or the Story Protocol itself, and subject to up to unlimited liability with respect to those actions.

Risks Related to Our Craft Spirits Business

We face significant competition with an increasing number of products and market participants that could materially and adversely affect our business, results of operations and financial results.

Our industry is intensely competitive and highly fragmented. Our craft spirits compete with many other domestic and foreign premium whiskies and other spirits. Our products also compete with popularly-priced generic whiskies and with other alcoholic and, to a lesser degree, non-alcoholic beverages, for drinker acceptance and loyalty, shelf space and prominence in retail stores, presence and prominence on restaurant alcoholic beverage lists and for marketing focus by our distributors, many of which carry extensive portfolios of spirits and other alcoholic beverages. We compete on the basis of product taste and quality, brand image, price, service and ability to innovate in response to consumer preferences. This competition is driven by established companies and new entrants in our markets and categories. In the United States, spirits sales are relatively concentrated among a limited number of large suppliers, including Diageo plc (NYSE: DEO), Pernod Ricard SA, E & J Gallo Winery, Proximo Spirits, Sazerac Company, MGP, and Constellation Brands, Inc. (NYSE: STZ), among others. These and our other competitors may have more robust financial, technical, marketing and distribution networks and public relations resources than we have. As a result of this intense competition, combined with our growth goals, we have experienced and may continue to face upward pressure on our selling, marketing and promotional efforts and expenses. There can be no assurance that in the future we will be able to successfully compete with our competitors or that we will not face greater competition from other distilleries, producers and beverage manufacturers.

If we are unable to successfully compete with existing or new market participants, or if we do not effectively respond to competitive pressures, we could experience reductions in market share and margins that could have a material and adverse effect on our business, results of operations and financial results.

We compete in an industry that is brand-conscious, so brand name recognition and acceptance of our products are critical to our success.

Our business is substantially dependent upon awareness and market acceptance of our products and brands by our targeted consumers. In addition, our business depends on the acceptance by our independent distributors of our brands as beverage brands that have the potential to provide incremental sales growth rather than reduce distributors’ existing beverage sales. Although we believe we have been successful in establishing our brands as recognizable brands in the regional Pacific Northwest premium craft spirits industry, we may be too early in the product life cycle of these brands to determine whether our products and brands will achieve and maintain satisfactory levels of acceptance by independent distributors, retail customers and consumers. We believe the success of our brands will also be substantially dependent upon acceptance of our product name brands. Accordingly, any failure of our brands to maintain or increase acceptance or market penetration would likely have a material adverse effect on our revenues and financial results.

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A reduction in consumer demand for whiskey, ~~vodka, gin, RTDs~~ and other spirits, which may result from a variety of factors, including demographic shifts and decreases in discretionary spending, could materially and adversely affect our business, results of operations and financial results.

We rely on consumers’ demand for our craft spirits. While over the past several years there have been modest increases in consumption of beverage alcohol in most of our product categories and geographic markets, there have been periods in the past in which there were substantial declines in the overall per capita consumption of beverage alcohol products in the U.S. and other markets in which we participate or plans to participate. Consumer preferences may shift due to a variety of factors, including changes in demographic or social trends, changes in discretionary income, public health policies and perceptions and changes in leisure, dining and beverage consumption patterns. Our success will require us to anticipate and respond effectively to shifts in consumer behavior and drinking tastes. If consumer preferences were to move away from our Heritage Distilling or other brands, our results of operations would be materially and adversely affected.

A limited or general decline in consumer demand could occur in the future due to a variety of factors, including:

•a general decline in economic or geopolitical conditions;

•a general decline in the consumption of alcoholic beverage products in on-premises establishments, such as those that may result from smoking bans and stricter laws relating to driving while under the influence of alcohol and changes in public health policies~~, including those implemented to address the COVID-19 pandemic~~;

•a generational or demographic shift in consumer preferences away from whiskies and other spirits to other alcoholic beverages or non-alcoholic beverages;

•increased activity of anti-alcohol groups;

•increased regulation placing restrictions on the purchase or consumption of alcoholic beverage products;

•concern about the health consequences of consuming alcoholic beverage products; and

•increased federal, state, provincial, and foreign excise, or other taxes on beverage alcohol products and increased restrictions on beverage alcohol advertising and marketing.

Demand for premium spirits brands, like ours, may be particularly susceptible to changing economic conditions and consumer tastes, preferences and spending habits, particularly among younger demographic groups, which may reduce our sales of these products and adversely affect our profitability. For instance, a reduction in the overall number of consumers over the legal drinking age, but who are relatively new to the market, may choose to consume less alcohol, or to stop consuming alcohol altogether. An unanticipated decline or change in consumer demand or preference could also materially impact on our ability to forecast future production requirements, which could, in turn, impair our ability to effectively adapt to changing consumer preferences. Any reduction in the demand for our spirits products would materially and adversely affect our business, results of operations and financial results.

Adverse public opinion about alcohol could reduce demand for our products.

In the past, anti-alcohol groups have advocated successfully for more stringent labeling requirements, higher taxes and other regulations designed to discourage alcohol consumption. More restrictive regulations, negative publicity regarding alcohol consumption and/or changes in consumer perceptions of the relative healthfulness or safety of beverage alcohol could decrease sales and consumption of alcohol and thus the demand for our products. This could, in turn, significantly decrease both our revenues and our revenue growth, causing a decline in our results of operations.

~~Due~~We tocould ~~the~~see ~~three-tier~~structural ~~alcohol~~changes ~~beverage distribution system~~ in the ~~United~~amount ~~States,~~of wealcohol ~~are~~purchased ~~heavily~~and ~~reliant~~consumed onin our ~~distributors~~markets ~~that~~as ~~resell~~the ~~alcoholic~~use ~~beverages~~of inGLP-1 ~~all~~and ~~states~~similar inweight ~~which~~loss wedrugs doincrease ~~business.~~among ~~Our~~the ~~inability~~population, towhich ~~obtain~~could ~~distribution~~create inmore ~~some~~pricing ~~states,~~competition or aan ~~significant~~overall reduction in ~~distributor~~sales ~~demand for our products, would materially~~ and ~~adversely~~revenues ~~affect~~associated ~~our~~with ~~sales and profitability~~alcohol.

~~Due~~An toincreasing ~~regulatory~~number ~~requirements~~of inAmericans ~~the~~are ~~United~~using ~~States,~~GLP-1 weor ~~sell~~similar drugs as a ~~significant~~primary ~~portion~~means of ~~our~~losing ~~craft~~weight. ~~spirits~~These todrugs ~~wholesalers~~work ~~for~~by ~~resale~~mimicking toor ~~retail~~enhancing ~~accounts.~~the AGLP-1 ~~change~~hormone inproduced by the ~~relationship~~body ~~with~~to ~~any~~lower ofblood ~~our~~sugar, ~~significant~~reduce ~~distributors~~appetite, ~~could~~slow ~~harm~~gastric ~~our~~emptying ~~business~~or ~~and~~ reduce ~~our~~glucagon, ~~sales.~~each ~~The laws and regulations~~ of ~~several~~which ~~states~~taken ~~prohibit~~by ~~changes of distributors~~themselves, ~~except~~or ~~under~~when ~~certain~~working ~~limited circumstances~~together, ~~making~~ends itup ~~difficult~~curbing tothe ~~terminate~~appetite orof ~~otherwise~~patients. ~~cease~~There ~~working~~are ~~with~~different atypes ~~distributor~~of ~~for~~GLP-1s, ~~poor~~including ~~performance~~semaglutide, ~~without reasonable justification~~dulaglutide, asand ~~defined~~liraglutide byamong ~~applicable statutes~~others. ~~Any~~Common ~~difficulty~~brand ornames ~~inability~~of tosuch ~~replace~~drugs ainclude ~~distributor~~Ozempic, ~~poor~~Wegovy, ~~performance~~Victoza, ofTrulicity ~~our~~and ~~major~~Zepbound, ~~distributors or our inability~~ to ~~collect~~name ~~accounts~~a ~~receivable~~few. ~~from~~Patients ~~our~~who ~~major~~use ~~distributors~~these ~~could~~drugs ~~harm~~report ~~our~~nausea, ~~business.~~worsened Inor ~~addition~~prolonged hangovers, anfaster ~~expansion~~intoxication ofand ~~the~~other ~~laws~~negative ~~and~~side ~~regulations~~effects ~~limiting~~if ~~the~~they ~~sale~~consume ofalcohol ~~our~~while ~~spirits~~using ~~would~~a ~~materially~~GLP-1. ~~and~~

22Two recent studies (Kaiser Family Foundation and RAND Corporation) indicate that nearly 12% of the adult U.S. population (one in eight American adults) reported taking GLP-1 drugs in 2025, a nearly doubling of the 6% who reported

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~~adversely~~taking ~~affect~~such ~~our~~drugs ~~business~~in 2024. In early 2026, ~~results~~drug makers began marketing cheaper pill-forms of ~~operations~~GLP-1s for mass release and ~~financial~~based ~~results.~~on ~~There~~this ~~can~~development, beone noleading ~~assurance~~trade ~~that~~association (the ~~distributors~~Bullvine) ~~and~~predicts ~~accounts~~more tothan ~~which~~20% weof ~~sell~~American ~~our~~adults ~~products~~ will ~~continue~~be tousing ~~purchase~~some ~~our~~form ~~products~~of orGLP-1 ~~provide~~by ~~our~~2027 ~~products~~(one ~~with~~in ~~adequate~~five ~~levels~~American adults). If the current usage rate of ~~promotional~~GLP-1 ~~support~~drugs of approximately 12% stays steady or increases, ~~which~~a ~~could~~significant ~~increase~~portion ~~competitive~~of ~~pressure~~the toAmerican ~~increase~~alcohol ~~sales~~consuming ~~and~~population ~~marketing~~may ~~spending~~be ~~and~~removed from the buying pool so long as they are taking these drugs. This could ~~materially~~lead to long-term structural changes in the entire alcohol industry impacting all sectors, including beer, wine, spirits, hard cider and ~~adversely~~RTD ~~affect~~spirits beverages. This type of change would likely have an adverse impact on our spirits business, ~~results~~as ofwe ~~operations~~compete with large and ~~financial~~small ~~results~~brands alike for the consumer’s attention and money.

Due to the three-tier alcohol beverage distribution system in the United States, we are heavily reliant on our distributors that resell alcoholic beverages in all states in which we do business. Our inability to obtain distribution in some states, or a significant reduction in distributor demand for our products, would materially and adversely affect our sales and profitability.

Due to regulatory requirements in the United States, we sell a significant portion of our craft spirits to wholesalers for resale to retail accounts. A change in the relationship with any of our significant distributors could harm our business and reduce our sales. The laws and regulations of several states prohibit changes of distributors, except under certain limited circumstances, making it difficult to terminate or otherwise cease working with a distributor for poor performance without reasonable justification, as defined by applicable statutes. Any difficulty or inability to replace a distributor, poor performance of our major distributors or our inability to collect accounts receivable from our major distributors could harm our business. In addition, an expansion of the laws and regulations limiting the sale of our spirits would materially and adversely affect our business, results of operations and financial results. There can be no assurance that the distributors and accounts to which we sell our products will continue to purchase our products or provide our products with adequate levels of promotional support, which could increase competitive pressure to increase sales and marketing spending and could materially and adversely affect our business, results of operations and financial results.

Failure of third-party distributors upon which we rely could adversely affect our business.

We rely heavily on third-party distributors for the sale of our products to retailers, restaurants, bars, hotels, casinos, entertainment venues and other accounts. We expect sales to distributors to represent an increasingly substantial portion of our future net sales as we continue to grow our network of wholesale distributors. Consolidation among distributors or the loss of a significant distributor could have a material adverse effect on our business, financial condition and results of operations. Our distributors may also provide distribution services to competing brands, as well as larger, national or international brands, and may be to varying degrees influenced by their continued business relationships with other larger beverage, and specifically, craft spirits companies. Our independent distributors may be influenced by a large competitor if they rely on that competitor for a significant portion of their sales. There can be no assurance that our distributors will continue to effectively market and distribute our products. The loss of any distributor or the inability to replace a poorly-performing distributor in a timely fashion, or our inability to expand our distribution network into states in which we do not currently have distribution, could slow our growth and have a material adverse effect on our business, financial condition and results of operations. Furthermore, no assurance can be given that we will successfully attract new distributors as we increase our presence in their existing markets or expand into new markets.

We incur significant time and expense in attracting and maintaining key distributors.

Our marketing and sales strategy depends largely on our independent distributors’ availability and performance. We currently do not have, nor do we anticipate in the future that we will be able to establish, long-term contractual commitments or agreements from some of our distributors and some of our distributors may discontinue their relationship with us on short notice. Some distributors handle several competitive products. In addition, our products are a small part of our distributors’ business. We may not be able to maintain our current distribution relationships or establish and maintain successful relationships with distributors in new geographic distribution areas. Moreover, there is the additional possibility that we may have to incur additional costs to attract and maintain key distributors in one or more of our geographic distribution areas to profitably exploit our geographic markets.

The marketing efforts of our distributors are important for our success. If our brands prove to be less attractive to our existing distributors and/or if we fail to attract additional distributors, and/or our distributors do not market and promote our products above the products of our competitors, our business, financial condition and results of operations could be adversely affected.

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It is difficult to predict the timing and amount of our sales because our distributors and their accounts are not required to place minimum orders with us.

Our independent distributors and their accounts are not required to place a minimum of monthly or annual orders for our products. To reduce their inventory costs, independent distributors typically order products from us on a “just in time” basis in quantities and at such times based on the demand for the products in a particular distribution area. For products in higher demand, there is typically a minimum par level held in distributors’ warehouses, and only once the inventory falls below that par level will a reorder be triggered. Accordingly, we cannot predict the timing or quantity of purchases by any of our independent distributors or whether any of our distributors will continue to purchase products from us in the same frequencies and volumes as they may have done in the past. Additionally, our larger distributors and partners may make orders that are larger than we have historically been required to fill. Shortages in inventory levels, supply of raw materials to our third-party producers or other key supplies could negatively affect us.

The sales of our products could decrease significantly if we cannot secure and maintain listings in the control states.

In the control states, the state liquor commissions act in place of distributors and decide which products are to be purchased and offered for sale in their respective states, and at what prices they will be offered to consumers. Products selected for listing must generally reach certain volumes and/or profit levels to maintain their listings. Products are selected for purchase and sale through listing procedures that are generally made available to new products only at periodically-scheduled listing intervals. Products not selected for listings can only be purchased by consumers in the applicable control state through special orders, if at all. If, in the future, we are unable to maintain our current listings in the control states, or secure and maintain listings in those states for any additional products we may produce or acquire, sales of our products could decrease significantly.

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The privatization of a control state could adversely impact our sales and our results of operations.

Once products are approved for sale by the state liquor commission in a control state, the products move through the normal state warehousing, wholesale, distribution and retail sales channels established under such a system. State owned, managed or regulated stores set the prices for the products and there are rules and regulations regarding shelf placement, samplings and retail sales to consumers and bars and restaurants. In these markets, the approval for shelf space and pricing is conducted through the state process. In some control states, there are increasing levels of discussion about privatization, either because of negative views toward state ownership of the liquor system, the need for states to generate cash through the one-time sale of assets, or due to other political pressures in those states. Once a state privatizes its liquor system it creates significant disruption during the transition period towards privatization as distributors need to set up new warehouses and sales teams and new delivery routes, and bars and restaurants who were required to focus on purchasing only from their local state liquor store now must navigate a new distribution system, sometimes with new pricing and new taxes. Likewise, if spirits sales move into private stores and major retail chains, new challenges are created for small or new brands like ours which then must compete for shelf space with larger, more established or better funded brands. If we are successful in growing our brand approval and sales in control states and one or more of those control states privatizes its liquor system, our sales, revenue and profitability derived from sales in those states may be disrupted.

Substantial disruption ~~to production~~ at ~~our~~the distilleries and distribution facilities, ~~or at a facility~~ with which we contract or partner for our production, or storage could occur.

A disruption in production at ~~our~~the distilleries or third-party production facilities with which we partner or contract could have a material adverse effect on our business. In addition, a disruption could occur at any of our other facilities or those of our suppliers, bottlers, co-packers or distributors. The disruption could occur for many reasons, including a full production schedule, fire, natural disasters, weather, water scarcity, manufacturing problems, disease, strikes, transportation or supply interruption, government regulation, cybersecurity attacks or terrorism. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more or may take a significant time to start production, each of which could negatively affect our business and financial performance.

Disruption within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial condition and results of operations.

The prices of ingredients, other raw materials, packaging materials, aluminum cans, glass bottles and other containers fluctuate depending on market conditions, governmental actions, climate change and other factors beyond our control. Substantial increases in the prices of our ingredients, other raw materials, packaging materials, aluminum cans and other containers, to the extent they cannot be recouped through increases in the prices of finished beverage products, could increase our operating costs and reduce our profitability. Increases in the prices of our finished products resulting from a higher cost of ingredients, other raw materials, packaging materials, aluminum cans and other containers could affect affordability in some markets and reduce our sales. In addition, some of our ingredients as well as some packaging containers, such as aluminum cans and glass bottles, are available from a limited number of suppliers. We and our suppliers and co-packers may not be able to maintain favorable arrangements and relationships with these suppliers, and our contingency plans may not be effective in preventing disruptions that may arise from shortages of any ingredients that are available from a limited number of suppliers. Adverse weather conditions may affect the supply of other agricultural commodities from which key ingredients for our products are derived. An increase in the cost, a sustained interruption in the supply, or a shortage of some of these ingredients, other raw materials, packaging materials, aluminum cans and other containers that may be caused by changes in or the enactment of new laws and regulations; a deterioration of our relationships with suppliers; supplier quality and reliability issues; trade disruptions; changes in supply chain; and increases in tariffs; or events such as natural disasters, widespread outbreaks of infectious diseases, power outages, labor strikes, political uncertainties or governmental instability, or the like could negatively impact our net operating revenues and profits.

Our reliance on distributors, retailers and brokers, or our inability to expand the TBN, could affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand our business into other geographic markets.45

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~~failing~~affordability toin ~~distribute~~some tomarkets ~~sufficient~~and ~~retailers~~reduce orour ~~positioning~~sales. In addition, some of our ~~products~~ingredients inas ~~localities~~well ~~that~~as ~~may~~some ~~not~~packaging becontainers, ~~receptive~~such toas ~~our~~aluminum ~~product~~cans and glass bottles, are available from a limited number of suppliers. ~~Our~~We ~~ability~~and toour ~~incentivize~~suppliers and ~~motivate~~co-packers ~~distributors~~may not be able to ~~manage~~maintain favorable arrangements and ~~sell~~relationships with these suppliers, and our ~~products~~contingency isplans ~~affected~~may bynot ~~competition~~be effective in preventing disruptions that may arise from ~~other~~shortages ~~beverage~~of ~~companies~~any ~~who~~ingredients ~~have~~that ~~greater~~are ~~resources~~available ~~than~~from wea dolimited number of suppliers. ToAdverse ~~the~~weather ~~extent~~conditions ~~that~~may ~~our~~affect ~~distributors,~~the ~~retailers~~supply ~~and~~of ~~brokers~~other ~~are~~agricultural ~~distracted~~commodities from ~~selling~~which key ingredients for our products orare doderived. ~~not~~An ~~employ~~increase ~~sufficient~~in ~~efforts~~the incost, ~~managing~~a ~~and~~sustained ~~selling~~interruption ~~our~~in ~~products~~the supply, ~~including~~or ~~re-stocking~~a ~~the~~shortage ~~retail~~of ~~shelves~~some ~~with~~of ~~our~~these ~~products~~ingredients, ~~our~~other ~~sales~~raw materials, packaging materials, aluminum cans and ~~results~~other ofcontainers ~~operations~~that ~~could~~may be ~~adversely~~caused ~~affected.~~by ~~Furthermore,~~changes in or the ~~financial~~enactment ~~position~~of ornew ~~market~~laws ~~share~~and regulations; a deterioration of our relationships with suppliers; supplier quality and reliability issues; trade disruptions; changes in supply chain; and increases in tariffs; or events such ~~third~~as ~~parties~~natural ~~may~~disasters, ~~deteriorate~~widespread outbreaks of infectious diseases, ~~which~~power outages, labor strikes, political uncertainties or governmental instability, or the like could ~~adversely~~negatively ~~affect~~impact our ~~distribution,~~net ~~marketing~~operating revenues and ~~sales activities~~profits.

Our ability to maintain and expand our existing markets for our products, and to establish markets in new geographic distribution areas, is dependent on our ability to establish and maintain successful relationships with reliable distributors, retailers and brokers strategically positioned to serve those areas, and our ability to expand the reach of the TBN. Most of our distributors, retailers and brokers sell and distribute competing products and our products may represent a small portion of their business. This network’s success will depend on the performance of its distributors, retailers and brokers. There is a risk that the mentioned entities may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products in localities that may not be receptive to our products. Our ability to incentivize and motivate distributors to manage and sell our products is affected by competition from other beverage companies that have greater resources than we do. To the extent that our distributors, retailers and brokers are distracted from selling our products or do not employ sufficient efforts in managing and selling our products, including re-stocking the retail shelves with our products, our sales and results of operations could be adversely affected. Furthermore, the financial position or market share of such third parties may deteriorate, which could adversely affect our distribution, marketing and sales activities.

We also expect to expand our business into other geographic markets by expanding our TBN network and entering new relationships or joint ventures with additional North American Indian tribes. While we believe we have a significant first mover advantage in our ability to attract and expand the interest of North American Indian tribes in establishing distilleries on tribal lands, it is possible that the interest of tribes in the construction or operation of distilleries will not develop as expected or will develop at a slower pace. To the extent we are unable to expand the TBN in a timely manner or at all, our sales and results of operations could be adversely affected.

Our ability to maintain and expand our distribution network and attract additional distributors, retailers and brokers, and to expand the TBN will depend on many factors, some of which are outside our control. Some of these factors include:

•the level of demand for our brands and products in a particular distribution area;

•our ability to price our products at levels competitive with those of competing products; and

•our ability to deliver products in quantity and at the time ordered by distributors, retailers and brokers.

We may not be able to successfully manage all or any of these factors in any of our current or prospective geographic areas of distribution. Our inability to achieve success regarding any of these factors in a geographic distribution area will have a material adverse effect on our relationships in that geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely affect our revenues and financial results.

Our TBN efforts may not be successful.

Our business plan includes licensing our products, services and concepts to certain third parties, including tribal business entities or American Indian tribes as part of the TBN. As planned, we would receive royalties associated with revenues earned through non-exclusive limited licenses for the right to use, sell and assign certain of our patents, trademarks, brands, recipes and other protected assets. However, these efforts may not be successful. While the current plan does not envision us providing any capital to build out and operate these licensed locations, our involvement in these efforts will require the time and efforts of our employees and executives, which may detract from their time spent building our brand and value as a standalone entity. The risks associated with our TBN plan, which individually or in the aggregate, could harm our overall brand, reputation, perception in the market and financial position, include:

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our brand and value as a standalone entity. The risks associated with our TBN plan, which individually or in the aggregate, could harm our overall brand, reputation, perception in the market and financial position, include:

•Sovereign Immunity and Choice of Venue — Tribes enjoy sovereign immunity for certain activities that take place on trust land. Since it is envisioned that these partnerships will occur on trust land, we intend to seek a waiver of sovereign immunity. There can be no assurance that such a waiver will be granted, or if it would be interpreted as enforceable later. Likewise, unless a tribe grants us a waiver to seek relief in a federal or state court, there is a risk that a dispute must be heard in Tribal court, which may not provide us with a fair hearing.

•Right of entry — In the event we secure a waiver of sovereign immunity or the right to seek a venue for hearing in federal or state courts, there is no guarantee that we will secure an adequate right of entry onto Tribal land to enforce our rights. Such rights could include recovery of intellectual property, personal property or other property, goods, equipment, stock or other tangible assets owed to us. Even if we secure a right of entry, there can be no assurance that we will be respected or enforced by proper authorities with jurisdiction over the matter.

•Product Quality — There can be no assurance that our Tribal partners will adequately follow each of our prescribed procedures, recipes and protocols to ensure compliance with labeling standards or the quality of product that we otherwise insist on or they may not keep sufficiently detailed records for state and federal auditing purposes. Either event could cause products to be redistilled, dumped, impounded or disposed of in a way that adversely impacts our operating results and financial condition.

•Failure to Produce — Our Tribal partners might fail to produce the amount of product required to meet demand, fulfill contracts or propose new products to distribution outlets. Further, equipment, raw ingredients and/or finished ingredients or goods may not be readily available for licensed partners at any given time, which could negatively impact the cash flow and deliverability of an operation, the licensed partners and/or our brand.

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•Cross Sales into Distribution Channels — Our Tribal partners might attempt to directly sell into the market in violation of our distribution agreements, or attempt to compete with us in distribution outside the context of a formal company-wide distribution plan, which could disrupt our contractual or legal obligations, undercut us in the market, flood the market with product or cause confusion within distribution channels.

•Change of leadership — Tribal organizations have regular elections for leadership positions. It is almost certain that at some point during the negotiation, design, construction or operation of a location that a change in Tribal governance will conflict with the operation of the business to the detriment of us. This could result in our decision to seek early termination of a contract to avoid disruptions in other parts of our business or to protect the integrity of our brand and reputation if the relationship with a Tribal partner materially deteriorates.

•Failure to resell the concept — The initial Tribes with which we work may not inspire other Tribes to join the TBN, thereby impacting the future number of TBN locations and future anticipated growth plans. Accordingly, an insufficient number of Tribal partners may decide to join the TBN, or such licensees may have an insufficient level of sales to justify or sustain continued operations.

•Failure to take our management input into account — Tribal partners may not consider our desire or input with respect to production, branding, marketing, sales and distribution.

•Failure to have adequate oversight over employees, personnel, product — As the actual employer of employees operating the new locations, tribes may not consider our hiring input or guidance as it relates to customer service, technical and quality assurance, documentation and compliance, among other issues. In such an event, we would have little recourse to remove Tribal employees from key positions.

•Failure to have access to the books and records — Tribal partners might withhold financial information from us such that we cannot adequately determine sales, costs and net revenues, among other financial metrics.

•Interpretation of federal or state law; failure to follow the law — We are one of the first entities attempting to license spirits manufacturing. There is a risk that federal, state and/or local regulators may view this activity as a violation of applicable laws, rules or regulations, such that we and our licensed partners must adapt our business plans and strategies, or to abandon our TBN plans altogether. There is also a risk that a member tribe in our TBN may not follow the law.

•Community backlash — Before, during or after our partnerships, Tribal or non-Tribal members might accuse us of engaging in activities that enhance or promote alcoholism and our impact on Indian communities. Such a campaign could tarnish our brand and put pressure on us or our Tribal partners to terminate our arrangements.

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•Failure to be perceived as authentically “local” — Some consumers may not view the idea of licensed distilleries as being authentically “local,” such that our brand reputation and products may be diminished in a particular region.

A non-profit or charitable partner could act in a way that damages our brand.

We currently partner with non-profits and charitable organizations to market some of our products to generate sales for our company and raise donations for charities. There is a risk one or more of these entities, or specific people within their groups, could misuse donations we provide them or act in a way not in conformity with the goals or mission of the partnership. This could cause reputational damage to us or to our brands, particularly to our brands, that may be associated with the non-profit efforts and may make it more difficult for us to secure future partners.

If we do not adequately manage our inventory levels, our operating results could be adversely affected.

We need to maintain adequate inventory levels to be able to deliver products to distributors on a timely basis. Our inventory supply depends on our ability to correctly estimate demand for our products. Our ability to estimate demand for our products is imprecise, particularly for new products, seasonal promotions and new markets. If we materially underestimate demand for our products or our third-party producers are unable to maintain sufficient inventory of raw materials, we might not be able to satisfy demand on a short-term basis. If we overestimate distributor or retailer demand for our products, we may end up with too much inventory, resulting in higher storage costs, increased trade spending and the risk of inventory spoilage. If we fail to manage our inventory to meet demand, we could damage our relationships with our distributors and retailers and could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results. In addition, if the inventory of our products held by our distributors and retailers is too high, they will not place orders for additional products, which would also unfavorably impact our sales and adversely affect our operating results.

26We or our third-party producers may not be able to replicate the flavor profiles of our products.

~~Table~~We may develop a following for one or more products in which we or our third-party producers might not be able to replicate the recipe or flavor profile. Our super premium aged whiskeys, rums and brandies take time to age, and we follow specific steps in our recipes. There is a chance a particular step is not taken properly or is missed entirely. In this case, it might be years before we find the impact of ~~Contents~~such actions on the final product and by that time, we may not be able to use that product for our intended purposes, which could impact our business plans and/or revenue targets. It could also mean a product we were planning to age to meet future plans might not be available, which could impact future revenues or value.

We may not be able to replicate the flavor profiles of our products.

We may develop a following for one or more products in which we might not be able to replicate the recipe or flavor profile. Our super premium aged whiskeys, rums and brandies take time to age, and we follow specific steps in our recipes. There is a chance a particular step is not taken properly or is missed entirely. In this case, it might be years before we find the impact of such actions on the final product and by that time, we may not be able to use that product for our intended purposes, which could impact our business plans and/or revenue targets. It could also mean a product we were planning to age to meet future plans might not be available, which could impact future revenues or value.

There is a long lead time for the production of our products due to the aging process for spirits.

There is a significant lead time required for us to age products to scale up for increased demand. As our footprint and sales grow, it may be difficult for us to produce and adequately age certain of our products to meet or sustain demand. Likewise, if we find suppliers of adequate supplies in the marketplace, there is no guarantee such supplies will remain available, or that if they are available, that the price for such items will be commercially reasonable.

We have a minority ownership interest in another brand, the value of which may never be realized or monetized, or which could be significantly reduced or written down.

While we have a minority interest in Flavored Bourbon LLC (“FBLLC”), the owner of the Flavored Bourbon brand, there is no guarantee that such brand will ever grow in value or retain its current value or any value at all. The management team of FBLLC could fail in their efforts to grow the Flavored Bourbon brand and our investment in such a brand may never be monetized. The majority owners of FBLLC, or FBLLC’s management team, could fail to adhere to their contractual obligations to us as they relate to future distributions or payments, which could adversely affect our financial condition and results of operations. If an investor invests in us assuming a certain return or share in proceeds from the growth or sale of such brand, such investor may never realize such returns, or the value of such investor’s investment in us could decrease materially.

In addition, a well-known actor and celebrity is a co-owner of FBLLC and has been publicly and prominently involved in marketing the Flavored Bourbon brand to consumers. If any celebrity associated with the brand falls ill and cannot fully recover, or he or she fully recovers and chooses to disengage from continuing to market the Flavored Bourbon brand, it could severely impact the planned growth for the brand and cause the anticipated future value to never be realized. It could also impact the ability of the Flavored Bourbon brand to be monetized. If an investor invests in us assuming a certain return or share in proceeds from the growth or sale of such brand because of the co-ownership and marketing support of such actor, such investor may never realize such returns, or the value of such investor’s investment in us could decrease materially.

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In addition, if any celebrity associated with the brand is accused of making comments or engaging in any activity that is offensive, dangerous or illegal, it could materially impact the value of the Flavored Bourbon brand and an investor’s expectation of returns from the possible sale of such brand.

Some of our future earnings from any sale of FBLLC have been pledged as inducements to secure past financings, which could reduce or eliminate our receipt of gains from the future sale of FBLLC for the benefit of our company or our investors.

As an inducement to obtain financing in 2022 and 2023 through the sale of convertible notes, we agreed to pay to the investors in such financings a portion of the proceeds we may receive from the sale of FBLLC or the Flavored Bourbon brand in the amount of 150% of their subscription amounts. For additional information regarding such payment obligation, see Note 5 to our consolidated financial statements for the years ended December 31, ~~2024~~2025 and ~~2023~~2024 included elsewhere in this ~~filing~~report. As a result of such payment obligation, purchasers of our common stock who may have anticipated a certain return, or expected to share in our proceeds, from the growth or sale of FBLLC or the Flavored Bourbon brand may never realize such returns, or the value of such purchasers’ investment in us could decrease materially after required payments to our creditors are made.

Our interest in FBLLC or any future brand or entity in which we invest could be subject to dilution if there is a capital call in which we do not participate.

As a minority owner in FBLLC, we do not control the budget, spending or planning associated with the Flavored Bourbon brand, nor do we control whether there is a capital call, nor the terms of any offering that would result from a capital call. A capital call by FBLLC for which we do not have the resources to participate in full, or at all, could lead to dilution of our ownership in the Flavored Bourbon brand. A capital call by FBLLC could also have terms that put us in a less favorable financial position regarding any future potential earnings of the brand if we do not or cannot participate in such capital call. Conversely, if we choose to participate in a capital call, there is no guarantee of success or a return on such an investment. If an investor invests in us assuming a certain return or share in proceeds from the growth or sale of the Flavored Bourbon brand because of our current ownership level in FBLLC, such investor may never realize such returns, or the value of such investor’s investment in us could decrease materially.

27In the first quarter 2024, FBLLC completed approximately $10 million of a planned $12 million capital call to fund growth in its operations and marketing. We have no view to when, or if, the final $2 million will be raised via this facility and there should be no expectation that we will participate in the remainder of that offering if they elect to complete it.

~~Table~~An interruption of ~~Contents~~our operations or a catastrophic event at the facilities of any of our third-party producers or any significant supplier could negatively affect our business.

~~such~~Although anwe ~~investment.~~require Ifour anthird-party ~~investor~~producers ~~invests~~to inmaintain usinsurance ~~assuming~~coverage afor ~~certain~~various ~~return~~property ordamage ~~share~~and inloss ~~proceeds~~events, ~~from~~an ~~the~~interruption ~~growth~~in or ~~sale~~loss of ~~the~~operations ~~Flavored~~at ~~Bourbon~~any ~~brand because~~ of ~~our~~the ~~current~~distilleries ~~ownership~~or ~~level~~other inproduction ~~FBLLC,~~facilities ~~such~~of ~~investor~~our ~~may~~third-party ~~never~~producers ~~realize~~could ~~such~~reduce ~~returns,~~ or ~~the~~postpone ~~value~~production of ~~such~~our ~~investor’s~~products, ~~investment~~which ~~in us~~ could ~~decrease~~have ~~materially.~~a Inmaterial ~~the~~adverse ~~first~~effect ~~quarter~~on ~~2024~~our business, ~~FBLLC~~results ~~completed approximately $10 million~~ of aoperations, ~~planned~~or ~~$12~~financial ~~million~~condition. ~~capital~~To ~~call~~the toextent ~~fund~~that ~~growth~~our inpremium ~~its~~or ~~operations~~value-added ~~and~~products ~~marketing.~~rely Weon ~~have~~unique noor ~~view~~proprietary toprocesses ~~when,~~ or iftechniques, ~~the~~replacing ~~final~~lost $2production ~~million~~by ~~will~~purchasing befrom ~~raised~~other ~~via~~outside ~~this~~suppliers ~~facility~~would ~~and there should~~ be ~~no expectation that we will participate in the remainder of that offering if they elect to complete it~~difficult.

AnWe ~~interruption~~also store a portion of our ~~operations~~own inventory at our distribution warehouses in Gig Harbor, Washington. Some of our raw inputs are stored at supplier warehouses until our contract producers are ready to receive them. At times we have raw goods, work-in-progress inventory, or finished goods at third-party production or co-packing facilities, or in transit between any number of locations. If a catastrophic event were to occur at any of these locations or while in transit or storage, our ~~facilities~~business, financial condition or ~~the~~results ~~facilities~~of operations could be adversely affected. The loss of a ~~partner~~significant amount of our aged inventory at these facilities through fire, natural disaster or ~~supplier~~otherwise could ~~negatively~~result in a reduction in supply of the affected product or products and could affect our ~~business~~long-term performance of affected brands.

Although we maintain insurance coverage for various property damage and loss events, an interruption in or loss of operations at any of our distilleries or other production facilities could reduce or postpone production of our products, which could have a material adverse effect on our business, results of operations, or financial condition. To the extent that our premium or value-added products rely on unique or proprietary processes or techniques, replacing lost production by purchasing from outside suppliers would be difficult.

Part of our business plan contemplates our customers storing barreled inventory of aged premium whiskeys, rums and brandies at our barrel storage facility in Gig Harbor, Washington. If a catastrophic event were to occur at this facility or at our warehouses, our customers’ products or business could be adversely affected. The loss of a significant amount of aged inventory at these facilities through fire, natural disaster or otherwise could result in customer claims against us, liability for customer losses, and a reduction of warehouse services revenue.

We also store a substantial amount of our own inventory at our distribution warehouses in Gig Harbor, Washington and Eugene, Oregon. In addition, we store finished goods and merchandise at all of our retail locations. Some of our raw inputs are stored at supplier warehouses until we are ready to receive them. At times we have raw goods, work-in-progress inventory, or finished goods at third-party production or co-packing facilities, or in transit between any number of locations. If a catastrophic event were to occur at any of these locations or while in transit or storage, our business, financial condition or results of operations could be adversely affected. The loss of a significant amount of our aged inventory at these facilities through fire, natural disaster or otherwise could result in a reduction in supply of the affected product or products and could affect our long-term performance of affected brands.

Likewise, the facility of a TBN partner or supplier producing or storing product, inventory or aging inventory could suffer an uninsured or underinsured loss that impacts our business. This could result in a reduction in supply of the affected product or products and could materially adversely affect the long-term performance of certain of our brands.

The formulas, recipes and proportions used in the production of our products may differ materially from those we have assumed for purposes of our business plan.

The assumed formulas, recipes and proportions in our business plan, and the resulting product yields, revenues and profits, could greatly differ from what we assumed. As a result, our financial projections could change dramatically overall and on a per-bottle or per-unit basis. Such changes could result in significant reductions in the assumptions for sales, profits ~~and distributions for stockholders, thereby negatively impacting potential returns for investors or putting the investors’ investments at risk.~~

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and distributions for stockholders, thereby negatively impacting potential returns for investors or putting the investors’ investments at risk.

We may be disparaged publicly or in the press for not being authentically “craft.”

Having ~~multiple~~our ~~distillery~~product ~~locations~~produced solely by third-party producers, increasing the scale of our operations, collaborating with larger partners to achieve our goals, licensing our brand to third parties for production, or becoming a publicly-traded company could, individually or in the aggregate, impact how and whether consumers, competitors, regulators and the media, among others, perceive us as a “craft” distiller. In addition, because we are permitted to, and often do, source intermediate and finished spirits materials in bulk, such as whiskeys and neutral grain spirits, for blending, flavoring, bottling, mixing or aging, a public accusation or pronouncement by a third party or the press of such a practice as not “craft” could cause us to come under intense scrutiny in the market such that we lose our perception as a “craft” distiller, which could result in consumer backlash, negative news stories, the removal of our products from bars, restaurants and retail stores and the dropping of our products by distributors and wholesalers. Any such scenario would likely cause significant hardship for us and could cause an investment in us to lose all or some of its value.

We are subject to seasonality related to sales of our products.

Our spirits business is subject to substantial seasonal fluctuations. Historically, a significant portion of our net sales and net earnings of our spirits segment has been realized during the period from June through August and in November and December. Accordingly, the operating results of our spirits segment may vary significantly from quarter to quarter. Our operating results for any quarter are not necessarily indicative of any other results. If for any reason our spirits sales were to be substantially below seasonal norms, our annual revenues and earnings could be materially and adversely affected.

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operating results may vary significantly from quarter to quarter. Our operating results for any quarter are not necessarily indicative of any other results. If for any reason our sales were to be substantially below seasonal norms, our annual revenues and earnings could be materially and adversely affected.

If our inventory is lost due to theft, fire or other damage or becomes obsolete, our results of operations would be negatively impacted.

We expect our inventory levels to fluctuate to meet customer delivery requirements for our products. We are always at risk of loss of that inventory due to theft, fire or other damage, and any such loss, whether insured against or not, could cause us to fail to meet our orders and harm our sales and operating results. Also, our inventory may become obsolete as we introduce new products, cease to produce old products or modify the design of our products’ packaging, which would increase our operating losses and negatively impact our results of operations.

Weather conditions may have a material adverse effect on our sales or on the price of raw materials used to produce spirits.

We operate in an industry in which performance is affected by the weather. Extreme changes in weather conditions may result in lower consumption of craft spirits and other alcoholic beverages. Unusually cold spells in winter or high temperatures in the summer can result in temporary shifts in customer preferences and impact demand for the alcoholic beverages we produce and distribute. Similar weather conditions in the future may have a material adverse effect on our sales, which could affect our business, financial condition and results of operations. In addition, inclement weather may affect the availability of grain used to produce raw spirit, which could result in a rise in raw spirit pricing that could negatively affect margins and sales.

Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our spirits business, operations or financial performance, and water scarcity or poor quality could negatively impact our production costs and capacity.

Our spirits business depends upon agricultural activity and natural resources. There has been much public discussion related to concerns that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Severe weather events and climate change may negatively affect agricultural productivity in the regions from which we presently source our agricultural raw materials. Decreased availability of our raw materials may increase the cost of goods for our products. Severe weather events, or changes in the frequency or intensity of weather events, can also disrupt our supply chain, which may affect production operations, insurance cost and coverage, as well as delivery of our products to wholesalers, retailers and consumers.

Water is essential in our product production and is a limited resource in some of the regions in which weour third-party producers operate. If climate patterns change and droughts become more severe in any of the regions in which weour third-party producers operate, there may be a scarcity of water or poor water quality which may affect our production costs or impose capacity constraints. Such events could adversely affect the results of operations and financial condition.

During the fermentation process required to make spirits, carbon dioxide is produced and vented into the atmosphere. Currently there are no regulations in the industry requiring capture of carbon dioxide. If a government decided to implement such requirements, it might not be technically feasible for us to comply, or to comply in a way that allows us to operate profitably. Failure to implement any such rules could result in temporary or permanent loss of licenses, fines, penalties or other negative outcomes for us.50

The equipment we use and intend to purchase in the future to make our products or offer our services may not perform as planned or designed.

The equipment we use and intend to purchase in the future to make our products or offer our services may not perform as planned or designed. Such failures could significantly extend the time required to make batches of products for sale. As such, our reputation could suffer, thereby impacting future sales and revenues.

Further, given that we are engaged in a manufacturing process, it is likely that equipment will break down or wear out, including after the lapse of a warranty period related to such equipment, which could require us to expend unanticipated resources to repair or replace such equipment, thereby delaying, reducing or otherwise impacting our anticipated revenues.

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~~Temperature~~During ~~issues~~the fermentation process required to make spirits, carbon dioxide is produced and vented into the atmosphere. Currently there are no regulations in ~~fermentation~~the ~~vessels~~industry requiring capture of carbon dioxide. If a government decided to implement such requirements, ~~bacteria~~it might not be technically feasible for our third-party producers to comply, or ~~other~~to ~~contamination~~comply in a way that allows us to purchase product from them profitably. Failure to implement any such rules could ~~negatively~~result ~~affect~~in ~~the~~temporary ~~fermentation~~or ~~process~~permanent loss of licenses, fines, penalties or other negative outcomes for our third-party producers, which could adversely affect our ability to acquire products from them for resale.

~~Our~~The ~~products~~equipment ~~require~~our ~~proper~~third ~~fermentation~~party ofproducers ~~grains~~use or fruits. Temperature issues in fermentation vessels could negatively affect the fermentation process, as could bacteria or other contamination. As such, faulty fermentation or contamination could force us to ~~discard~~make ~~batches~~our ofproducts ~~fermenting~~may ~~product before it can be distilled. This would~~ not ~~only~~perform ~~cost~~as usplanned ~~in wasted fermenting products that must be disposed of, but would also extend the sales cycle for the affected products, thereby delaying, reducing~~ or ~~otherwise impacting our anticipated revenues~~designed.

The equipment our third party producers use to make our products may not perform as planned or designed. Such failures could significantly extend the time required to make batches of products for sale. As such, our reputation could suffer, thereby impacting future sales and revenues. Further, equipment is subject to breakage and downtime, including after the lapse of a warranty period related to such equipment, which could require our third party producers to expend unanticipated resources to repair or replace such equipment, thereby delaying, reducing or otherwise impacting our anticipated revenues from the sale of products they produce for us under contract.

We operate in highly-competitive industries, and competitive pressures could have a material adverse effect on our business.

The alcoholic beverages production and distribution industries in our region are intensely competitive. The principal competitive factors in these industries include product range, pricing, distribution capabilities and responsiveness to consumer preferences, with varying emphasis on these factors depending on the market and the product. The alcoholic beverage industry competes with respect to brand recognition, product quality, brand loyalty, customer service and price. Our failure to maintain and enhance our competitive position could materially and adversely affect our business and prospects for business. Wholesaler, retailer and consumer purchasing decisions are influenced by, among other things, the perceived absolute or relative overall value of our products, including our quality or pricing, compared to competitor’s products. Unit volume and dollar sales could also be affected by pricing, purchasing, financing, operational, advertising or promotional decisions made by wholesalers, state and provincial agencies, and retailers which could affect their supply of, or consumer demand for, our products. We could also experience higher than expected selling, general and administrative expenses if we find it necessary to increase the number of our personnel or our advertising or marketing expenditures to maintain our competitive position or for other reasons.

Our failure to manage growth effectively or prepare for product scalability could have an adverse effect on our employee efficiency, product quality, working capital levels and results of operations.

Any significant growth in the market for our products or our entry into new markets may require an expansion of our employee base for managerial, operational, financial, and other purposes. During any period of growth, we may face problems related to our operational and financial systems and controls, including quality control and delivery and service capacities. We would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate and motivate new employees.

Aside from increased difficulties in the management of human resources, we may also encounter working capital issues, as we will need increased liquidity to finance the marketing of the products we sell and the hiring of additional employees. For effective growth management, we must continue to improve our operations, management, and financial systems and controls. Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability. We cannot assure investors that we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential customers.

We may not be successful in introducing new products and services.

Our success in developing, introducing, selling and supporting new and enhanced products or services depends upon a variety of factors, including timely and efficient completion of service and product design, development and approval, and timely and efficient implementation of product and service offerings. Because new product and service commitments may be made well in advance of sales, new product or service decisions must anticipate changes in the industries served. There can be no assurance that we will be successful in selecting, developing, and marketing new products and services or in enhancing our planned products or services. Failure to do so successfully may adversely affect our business, financial condition and results of operations.

Further, new product and service introductions or enhancements by our competitors, or their use of other novel technologies, could cause a decline in sales or a loss of market acceptance of our planned products and services. Specifically, our competitors may attempt to install systems or introduce products or services that directly compete with ~~our planned products or service offerings with newer technology or at prices we cannot meet. Depending on our customer arrangements then in effect, we could lose customers as a result.~~

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~~Our~~our ~~management~~planned ~~team~~products ~~may~~or ~~not~~service beofferings ~~able~~with tonewer ~~successfully~~technology ~~implement~~or at prices we cannot meet. Depending on our ~~business~~customer ~~strategies~~arrangements then in effect, we could lose customers as a result.

Our success is, to a certain extent, attributable to the management, sales and marketing, and operational and technical expertise of certain key personnel. Justin Stiefel, our Chief Executive Officer, and Jennifer Stiefel, our President, perform key functions in the operation of our business. The loss of either officer could adversely affect our business, financial condition and results of operations. We do not maintain key-person insurance for members of our management team beyond those two executive officers because it is cost prohibitive to do so at this point. If we lose the services of any senior management, we may not be able to locate suitable or qualified replacements and may incur additional expenses to recruit and train new personnel, which could severely disrupt our business and prospects.

Our success in the future may depend on our ability to establish and maintain strategic alliances, and any failure on our part to establish and maintain such relationships would adversely affect our market penetration and revenue growth.

Due to the regulated nature of the alcoholic beverage industry, we must establish strategic relationships with third parties. Our ability to establish strategic relationships will depend on many factors, many of which are outside our control, such as the competitive position of our product and marketing plan relative to our competitors. We may not be able to establish other strategic relationships in the future. In addition, any strategic alliances that we establish may subject us to several risks, including risks associated with sharing proprietary information, loss of control of operations that are material to developed business and profit-sharing arrangements. Moreover, strategic alliances may be expensive to implement and subject us to the risk that the third party will not perform its obligations under the relationship, which may subject us to losses over which we have no control or expensive termination arrangements. As a result, even if our strategic alliances with third parties are successful, our business may be adversely affected by factors outside of our control.

We may embark on a growth strategy through acquisitions of companies or operations that complement our existing product lines, customers or other capabilities, such as our recent acquisition of Thinking Tree Spirits. We may be unsuccessful in identifying suitable acquisition candidates or may be unable to consummate desired acquisitions. To the extent any acquisitions are completed, we may be unsuccessful in integrating acquired companies or their operations, or if integration is more difficult than anticipated, we may experience disruptions that could have a material adverse impact on future profitability. Some of the risks that may affect our ability to integrate, or realize any anticipated benefits from, acquisitions include:

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