Business Description

DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION Description of operations — IP Strategy Holdings, Inc., formerly Heritage Distilling Holding Company, Inc. is a Delaware corporation, for the purpose of: investing in, managing, and/or operating cryptocurrency activities, including ecosystem validator services; and investing in, managing, and/or operating businesses that are engaged in the production, sale, or distribution of alcoholic beverages. The Company is headquartered in Gig Harbor, Washington and has two wholly owned subsidiaries, Heritage Distilling Company, Inc., a Washington corporation, and IP Strategy, LLC (“IP Strategy LLC”), a Nevada limited liability company, that are included in the consolidated financial statements. On February 17, 2026, the Company filed a Third Amended and Restated Certificate of Incorporation to change its name from Heritage Distilling Holding Company, Inc. to IP Strategy Holdings, Inc. The names of the Company’s wholly owned subsidiaries, Heritage Distilling Company, Inc. and IP Strategy, LLC, remained unchanged. See Note 19. HDC has operated since 2011 as a craft distillery making a variety of whiskeys, vodkas, gins and rums as well as RTD beverages. HDC also operated distillery tasting rooms in Washington and Oregon. On October 23, 2025, in response to coming lease increases, recently-enacted state tax increases on small businesses and pending wage increases, the Company announced that it would close its five owned and operated tasting rooms in Washington and Oregon effective December 31, 2025, along with the transition of production to third-party contract producers beginning in the first quarter of 2026. (See Note 18 - Restructuring.) These actions, along with a significant reduction in headcount and overhead, are expected to result in significant reductions in net expenses with a resulting positive impact to net income. The elimination of in-house production and the eventual termination of leases associated with operations is also expected to greatly reduce unabsorbed overhead expense for every case of product sold, thereby greatly improving margins. The Company will continue to sell spirits through distributors and direct to consumers online, and, through its TBN sales channel, the Company will continue to work with Native American tribes to license the Heritage Distilling Company brand and the Company’s products for production and sale by tribes in HDC-branded tasting rooms in or near their casino properties. IP Strategy LLC was formed in September 2025 as a subsidiary of IP Strategy Holdings, Inc. to accumulate and hold $IP Tokens, the native cryptocurrency of the Story Network, and to house validator and related cryptocurrency operations. Under the digital currency treasury strategy adopted in 2025, the Company purchases and holds $IP Tokens for long term investment purposes. Initial Public Offering — On November 25, 2024, the Company closed an IPO of 84,375 shares of common stock at $80 per share. Concurrently, the Company also closed a private offering of 19,110 common warrants to purchase shares of common stock with an exercise price of $0.20 per share at $79.80 per warrant. (See Note 9.) Rebranding and Change in Ticker Symbol — In September 2025, the Company rebranded as “IP Strategy,” reflecting its evolution into a public-market vehicle focused on the accumulation of $IP Tokens. In connection with the rebranding, the Company’s Nasdaq ticker symbol was changed from “CASK” to “IPST” and the Company commenced trading under the new symbol at the market open on September 22, 2025. Registration of Common Stock — On January 24, 2025, the Company filed a Form S-1 Registration Statement under the Securities Act of 1933 to register up to a maximum of 250,000 shares of common stock and 3,358 shares of common stock issuable upon the exercise of the Commitment Warrants, described below, of the up to $15,000,000 aggregate gross purchase price of shares of common stock (the “ELOC Shares”) that have been or may be issued by us to the ELOC Investor pursuant to the ELOC Purchase Agreement, establishing a committed equity facility (the “Facility” or “Equity Line of Credit”).…