NASDAQ: IPST

In parallel with our digital asset management operations, we continue to operate a streamlined spirits business through our Heritage Distilling Company subsidiary that markets and sells award-winning craft whiskeys and select flavored spirits. Over the past year, we have taken a number of steps to reduce the costs associated with, and increase the revenue from, our spirits segment and, as a result, our spirits business is becoming increasingly asset-light and is focused on wholesale distribution, direct-to-consumer (“DtC”) sales, and the expansion of our Tribal Beverage Network (“TBN”) through licensing, royalties, and management agreements.

Our Operating Segments

IP Management Infrastructure

Our digital asset–based infrastructure and IP management strategy is intended to bring value to our stockholders in the following ways:

•We operate a number of validator nodes on the Story Network, including new nodes established under our custody arrangement with Crypto.com, that are used to stake our own $IP Tokens. In a proof-of-stake network, such as the Story Network, validators earn incremental tokens from their efforts in securing the network and validating transactions. Third parties can also delegate $IP Tokens to our validator node on the Story Network for which we typically earn a 5% commission on the staking rewards earned by such third parties, which amount is subject to change in our discretion at any time and from time to time. At December 31, 2025, third parties had delegated 2,387,391.98 $IP Tokens to our validator, none of which had yet been migrated to our new validator set up under 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 provide 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

3

Table of Contents

finance activities we undertake will be subject to approval by the Technology and Cryptocurrency Committee of our Board and, if material in amount or scope, will be publicly disclosed.

•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. 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 do not intend to dedicate any of our treasury-allocated capital to other digital assets outside of those in the Story ecosystem. 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.

•We may sell our $IP Token holdings, whether on the open market, through block trades or in other negotiated transactions, for various reasons and at various times, which may include to raise cash for the repurchase of shares of our common stock when our Board believes such repurchases will result in the creation of accretive value for our stockholders and at such times when it is legally permissible to do so. We may also sell unlocked $IP Tokens or $IP Tokens earned from our validating efforts in the market under certain market conditions to build cash reserves, to acquire IP assets, to grow or launch a new product or service, or to cover ongoing expenses.

There can be no assurance, however, that the value of $IP Tokens will increase, and investors should carefully consider the risks associated with digital assets. See “Risk Factors — Risks Related to Our Cryptocurrency Treasury Reserve Strategy and $IP Tokens” for additional information.

Our Cryptocurrency Treasury Reserve 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

4

Table of Contents

include other cryptocurrencies, cash or other 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 we do not intend to dedicate any of our treasury-allocated capital to other digital assets other than USDC or others within the Story ecosystem. Furthermore, we view our $IP Token holdings as long-term holdings and expect to continue to accumulate $IP Tokens over time. We have not set any specific target for the amount of $IP Tokens we seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional financings, capital-raising or other activities to purchase additional $IP Tokens. Our $IP Token strategy is generally expected to involve, from time to time, subject to market conditions, (i) issuing equity, debt or other securities or engaging in other capital-raising transactions with the objective of using the net proceeds to purchase $IP Tokens, (ii) acquiring $IP Tokens with our liquid assets that exceed our working capital requirements, and (iii) the purchase of IP-related assets that produce cash on a regular basis and that can be registered on the Story Network, such as music or video catalogue rights. In the event we raise additional capital, our intention is to deploy the vast majority of those proceeds to purchase $IP Tokens in the open market in order to further support our staking and validator activities, subject to any terms that may be negotiated as part of such capital raises, and to begin to expand our income-generating holdings to include IP assets that generate cash flow, such as music or video catalogue rights. However, as of the date of this report, we have no specific plans or agreements in place for any capital-raising transaction or for the purchase of additional $IP Tokens or IP rights catalogues in the open market or through negotiated transactions.

Without the prior written approval of the Technology and Cryptocurrency Committee of our Board or the approval of our Board as a whole, we may not dispose of any of the 53.2 million $IP Tokens that 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 sale of covered call instruments on $IP Tokens, we do not currently plan to hedge our $IP Token holdings or use our $IP Tokens as collateral for loans, and we do not otherwise expect to engage in decentralized finance activities with our $IP 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.

While we do not have a formal fork or airdrop policy, in the event of a “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.

Our Staking Program

Pursuant to our treasury strategy, in September 2025, we began using the vast majority of our $IP Tokens in our treasury reserve to generate a return through various opportunities, with the most significant portion being allocated to our staking program. We began our staking efforts of our $IP Tokens in late September 2025 after several weeks of incremental testing. Our validator operations were launched following Board-level approval of a comprehensive security and information security framework and were funded from our existing resources, with costs limited to AWS hosting and security monitoring, none of which are material to our financial position. The primary challenges associated with validator operations are maintaining uptime and ensuring resilience against protocol-level slashing. We mitigate these risks through redundancy, continuous monitoring, and defense-in-depth security controls. Currently, all staked $IP Tokens we hold are staked to our own validator nodes on the Story Network in our own custody accounts and in third-party custodied accounts.

In early December 2025, we established a new validator under a custodian account held at Crypto.com, to which account we moved 1 million $IP Tokens from our own wallet for testing on the new validator. In December 2025, we also established new custody arrangements with Bitgo.com and Kraken to give us flexibility and diversity for our future staking operations. We began the process of moving nearly all of our $IP Tokens to our custodied validators in first quarter of 2026; however, we have not yet determined the final amounts or percentages of our $IP Tokens that will be allocated to each custodial account. By moving $IP Tokens to third-party custodian accounts where we can stake our $IP Tokens under longer-term contracts, we expect to receive substantially increased yield. We plan to continue evaluating additional custody arrangements with new custodians as our staking program progresses.

The Story Network penalizes bad behaviors by validators (specifically, double-signing blocks and downtime) by slashing out a fraction of their staked tokens. If a validator double signs for a block, the validator will get slashed 5% of its

5

Table of Contents

tokens and get permanently jailed, which is also referred to as “tombstoned.” If a validator is offline for too long and misses 95% of the last 28,800 blocks, the validator will get slashed 0.02% of its tokens and get jailed. A validator will also get jailed after self-undelegation if the validator’s remaining self-delegation amount is smaller than the minimum self-delegation. A jailed validator cannot participate in the consensus and earn any rewards; however, a jailed validator can unjail itself after a cooldown time, which is currently set at ten minutes. After ten minutes, the validator can call Story’s staking contract to unjail itself if its stake is more than the minimum stake amount (1,024 $IP Tokens), after which it can participate in the consensus again if it is still within the top 64 validators. One of our validator nodes incurred a slashing event during an early testing phase of our validator and prior to our validator being fully funded. That event did not have a material impact on the number of $IP Tokens or other assets we hold, and no additional slashing event or penalty has occurred with respect to our validator since that time. To date, our validators have been running at greater than 99.98% uptime.

The Story Network currently offers incremental staking rewards for $IP Tokens staked in a longer-term smart contract. To increase the yield on our $IP Tokens, beginning in December 2025, we have been transitioning our $IP Tokens to third-party custodied staking as mentioned above, and we have updated our staking strategy to begin allocating approximately 15% of our $IP Token holdings to long-term staking with up to an 18-month deactivation period, which provides us with rewards that are greater than the rewards associated with $IP Tokens staked in a flexible staking arrangement. In connection with the “activating” and “exiting” processes of $IP Token staking, any staked $IP Tokens will be inaccessible for a period of time determined by a range of factors, resulting in certain liquidity risks that we manage.

Process of Staking and Liquidity Management. Our Chief Investment Officer, members of our management team and the members of the Technology and Cryptocurrency Committee of our Board have periodic meetings to evaluate treasury operations, including the staking of our $IP Tokens. Based on these meetings, management determines the allocation of the $IP Token treasury to the staking program and, if we were to engage with outside validators, would determine the amount of the allocation of $IP Tokens to each validator, in an effort to ensure that no single third-party validator has such a large percentage of our stake that it represents concentration risk.

If we determine to reduce the amount of the $IP Tokens dedicated to the staking program or change the allocation of $IP Tokens, we will initiate an unstaking process and notify the validator of the change, which would effectively reverse the delegation of the $IP Tokens from the applicable validator node. $IP Tokens have a cooldown period known as the “deactivation period,” which is the time it takes for the unstaked $IP Tokens to become fully liquid. During this period, the tokens are not actively earning rewards, but they are also not yet available for transfer or use. The length of this period can vary based on network conditions but is generally 14 days. Once the deactivation period is complete, we will be able to transfer the $IP Tokens as determined by management.

Our staking program involves the temporary loss of the ability to transfer or otherwise dispose of our staked $IP Tokens. Under normal conditions, we will regain this ability over our unstaked $IP Tokens within 14 days of initiating the unstaking. However, there can be no guarantee that such process will result in our regaining complete control of our $IP Tokens in time to satisfy our current obligations. We maintain a certain amount of liquid $IP Tokens in our treasury and a certain amount of cash to ensure that we are able to satisfy our current obligations.

$IP Tokens and the Story 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

6

Table of Contents

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

In order to own, transfer or use $IP Tokens directly on the Story Network, a person generally must have internet access to connect to an access point on the Story Network and set up a third-party wallet, which is 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 validates such transactions. Using cryptography and its proof-of-stake consensus mechanism, the Story Network can come to a shared state of the network in a decentralized fashion and without a centralized leader.

Prior to transacting on the Story Network, a user generally must first install on its computer or mobile device a software program that will allow the user to generate a private and public key pair such as a wallet. The wallet also enables the user to connect to the Story Network, interact with decentralized applications, and transfer or swap $IP Tokens with other users or applications.

Each user has its own key pair that is stored in such software, like a wallet. To receive $IP Tokens in a peer-to-peer transaction, the $IP Token recipient must provide its public key to the party initiating the transfer. This activity is analogous to a recipient for a transaction in U.S. dollars providing a routing address in wire instructions to the payor so 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 where the payor is transferring the $IP Tokens. The recipient, however, does not make public or provide to the sender its private key (though the network can still verify the validity of the signature — i.e., that it was signed by the holder of the private key — using cryptography). As we migrate our $IP Tokens to custodied accounts, we will maintain private keys in compliance with their 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, we maintain all of the private keys and 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.

Story Network validators record and confirm transactions when they validate and add blocks of information to the Story Network blockchain. When a validator is selected to validate a block, it creates that block, which includes data relating to (i) the verification of newly submitted and accepted transactions and (ii) a reference to the prior block in the Story Network to which the new block is being added. The validator becomes aware of outstanding, unrecorded transaction requests through peer-to-peer data packet transmission and distribution discussed above.

Upon the addition of a block of $IP Token transactions, the Story Network software program of both the spending party and the receiving party will show confirmation of the transaction on the Story Network blockchain and reflect an adjustment to the $IP Token balance in each party’s Story Network public key, completing the $IP Token transaction. Once a transaction is confirmed on the Story Network blockchain, it is irreversible.

Validators

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.

Validators are typically professional operations that design and build dedicated machines and data centers, including “clusters,” which are groups of validators that act cohesively and combine their processing to confirm transactions. When a validator confirms a transaction, the validator and any associated stakers receive a fee comprised of a protocol-generated reward and transaction fees for transactions included in the validated block. The Story Network protocol splits fees into two components: a base cost and priority fee. The base cost is removed from circulation, or “burned”, and the priority fee is paid to validators. Additionally, certain actions by validators and delegators require one $IP Token to be burned. During the course of ordering transactions and validating blocks, validators may be able to prioritize certain transactions in return for increased transaction fees, an incentive system known as “Maximal Extractable Value” or “MEV.” For example, in blockchain networks that facilitate decentralized finance (DeFi) protocols in particular, such as the Story Network, users may attempt to gain an advantage over other users by offering greater transaction fees.

7

Table of Contents

Validators less commonly capture MEV in the Story Network because, unlike the Ethereum network, the Story Network does not publicly expose transactions before they are accepted by a validator.

Staking rewards on the Story Network are determined by the protocol and are distributed to validators and their associated stakers based on the proportion of their stake relative to the total active stake in the network. The rewards are funded by inflationary issuances of new tokens and transaction fees collected on the network. The specific amount each validator and staker receives depends on, among other things, their share of the total stake, the validator’s uptime and performance, and the overall network conditions.

Staking rewards on the Story Network are variable and 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.

Staking rewards on $IP Tokens are distributed at regular intervals. At the end of each epoch, with one epoch being roughly two days, the reward is calculated. The reward is automatically distributed at the beginning of the subsequent epoch. This regular reward frequency ensures that participants receive their share of rewards in a timely manner, reflecting their contribution to network security and transaction validation.

Use of Custodians and Storage of $IP Tokens

We currently self-custody the vast majority of our 53.2 million $IP Tokens, but we have begun the process of moving our $IP Tokens into third-party custodied accounts. In early December 2025, we established a new validator under a custodian account held at Crypto.com, to which account we moved 1 million $IP Tokens from our own wallet for the testing of our new validator. In December 2025, we also established new custody arrangements with Bitgo.com and Kraken to give us flexibility and diversity for our future staking operations. We plan to move nearly all of our $IP Tokens to these custodians for our validator program in the first quarter of 2026, the mix of which is yet to be determined. In doing so, we will then be able to stake our $IP Tokens under longer-term contracts to increase yield. We have implemented strict governance protocols to ensure security of the assets we hold. We will continue to evaluate our current custodians’ financial positions, insurance coverage, terms, level of service and security practices and, using such criteria, we will continue to evaluate other potential custodians in the market.

Overview of Crypto.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.

8

Table of Contents

Overview of Kraken

Kraken is a global digital asset platform operated by a group of affiliated entities under the “Kraken” brand, including Payward, Inc. and its subsidiaries, which provide digital asset trading, brokerage, staking, and related services to retail and institutional clients in multiple jurisdictions. Kraken is not a public company, and its operations are subject to evolving regulatory frameworks in the United States and internationally.

Kraken Custody and Banking Services. Institutional digital asset custody services are offered through Kraken Financial, a Wyoming-chartered Special Purpose Depository Institution (“SPDI”) bank operated by Payward Financial, Inc. d/b/a Kraken Financial. Kraken Financial is a state-regulated bank authorized under Wyoming law to provide digital asset custody services and to act as a qualified custodian for certain institutional clients.

Kraken Financial is distinct from Kraken’s exchange and trading platforms, which are operated by separate affiliates and are not banks. Client assets custodied by Kraken Financial are held in segregated accounts and are not insured by the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor 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

9

Table of Contents

offline devices and within these secure facilities to mitigate risk of hacks, errors or other unintended external exposure. Key ceremony processes are highly controlled, require segregation of duties across multiple parties and are reviewed and witnessed by designated oversight personnel. Thorough validations and signoffs are performed to verify the integrity and security of key generation ceremonies.

Intellectual Property on the Story Network

Like some other blockchain networks such as Ethereum and Solana, the Story Network supports the deployment of smart contracts, that is, programmatic code 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-purpose 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 usage rights associated with 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 be modeled and automated on-chain. For example, an artist uploading a music track to the Story protocol could use a smart contract to automatically register the song’s metadata, set licensing permissions for remixes, and specify that derivative works must automatically send a portion of their revenue back to the 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.

Development of technology on the Story Network that can further these intended outcomes includes tools for registering and timestamping original works, minting non-fungible tokens that represent licensed intellectual property with attached usage terms, creating composable derivative assets with traceable lineage, and facilitating decentralized creator groups to manage collective rights and royalty structures.

While the Story Network explores on-chain intellectual property registration and enforcement, it is important to acknowledge it is still experimental in nature. The legal status of assets registered on the network has not been tested or recognized by courts or regulatory bodies in any jurisdiction. For example, registration of authorship on the Story Network has not been recognized to constitute registration with the U.S. Copyright Office or confer the statutory benefits associated with such filings. Likewise, while smart contracts may automate licensing or royalty flows among participants, their enforceability under traditional contract law remains uncertain. As a result, the protocol’s intellectual property protections currently operate as private ordering mechanisms within the network, rather than as legally-binding instruments recognized by national or international intellectual property regimes.

As of March 31 2026, more than 50 DApps have been deployed to the Story Network, spanning categories such as digital publishing, music rights management, creative royalty distribution and collectible media. While other blockchains have supported similar use cases, the Story Network aims to provide first-class support for rights-based digital assets, including digital rights transactional recording and dispute resolution, reducing legal and technical overhead for creators.

Initial Creation of $IP Tokens and $IP Tokens Supply

Unlike 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 (net of $IP Tokens burned) since its inception. Additionally, certain actions by validators and delegators require one $IP Token to be burned.

The initially-created one billion $IP Tokens were allocated as follows:

Ecosystem and Community: approximately 384 million $IP Tokens, or 38.4% of the initial supply, was allocated towards promoting ecosystem growth and community development by supporting developers, community members, and users of the Story Network across product development, education, events, grants, service providers and other activities.

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.

10

Table of Contents

Early Backers: approximately 216 million $IP Tokens, or 21.6% of the initial supply, was retained by investors in the initial development project to compensate for their early efforts in the development of the Story Network.

Core Contributors: 200 million $IP Tokens, or 20% of the initial supply, was allocated to be used as compensation for team members contributing to the development of the Story protocol.

The tokens in the Ecosystem and Community, Story Foundation, Early Backers and Core Contributors allocations were subject to a staged lock-up release of up to 4 years, with monthly unlocks. The tokens in the Early Backers and Core Contributors categories had an initial partial release starting 12 months after the token launch in February 2025, which has since been extended to 18 months. The current circulating supply of unlocked tokens is approximately 352 million tokens, which includes the unlocked portion of the initial supply plus staking rewards that have been generated since February 2025.

Modifications to the Story Network

The Story Network is open-source and community-governed. Its development is overseen by Story Foundation and supported by core developers and independent contributors. These stakeholders can propose protocol upgrades, but adoption requires widespread acceptance among validators and users, consistent with decentralized governance norms.

The release of updates to the Story Network’s source code does not guarantee that the updates will be automatically adopted. As with other blockchain protocols, proposed upgrades are implemented only if a critical mass of validators and participants update their software. Users and nodes must accept any changes made to the Story source 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, a division 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 the source 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.

11

Table of Contents

Craft Spirits

Our craft spirits segment includes the production, marketing, licensing, and sale of a diverse line of award-winning craft super-premium whiskeys and premium-flavored whiskeys, under our owned and licensed 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 receiving 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.

At the end of 2025, in an effort to reduce the costs and increase the operating margins of this operating segment, we made the decision to transition to an asset light strategy whereby we began to reduce the number and types of spirits products we offer and emphasize margin expansion through premium and super-premium products, affinity-driven branding, and diversified go-to-market channels that reduce our reliance on high-touch point-of-sale retail operations and shelf-space-constrained wholesale distribution alone.

Brand Portfolio and Product Innovation

We offer a diversified portfolio of super-premium whiskeys and premium-flavored whiskey products:

•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.

There are approximately 18.3 million active-duty military and retirees in the U.S., including National Guard, Air National Guard and reservists in each branch of the military. Assuming 1.5 dependents per person (a dependent is defined by the military as a spouse, child under 21 unmarried or under 23 if a student, parent or custodian dependent), the total population of active military, retired military and dependent 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 garner a growing following given the specialty packaging and non-profit charitable partnerships we are forming to support the launch and sale of the line.

•Flavored Whiskey Leadership: In 2017, we created and launched Flavored Bourbon, a bourbon flavored with brown sugar 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. Following on the success of the Flavored Bourbon brand, and after examining the market, we created Cocoa Bomb chocolate whiskey, a premium flavored whiskey that was tested in a limited distribution in the Pacific Northwest in 2022 and first rolled out for wholesale expansion in 2023. In February 2025 and 2026, Cocoa Bomb was recognized as the “Best Flavored Whiskey in the United States” by Whiskey Magazine, and in March 2025, Cocoa Bomb was also named “World’s Best 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 the third time globally.

•Stiefel’s Select Aged Whiskey: While we 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 high-quality whiskeys. Unlike many new brands entering the premium craft whiskey 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-house for our Stiefel’s Select line. This allows us to leverage our experience and our innovative distillation methods while taking advantage of the Pacific Northwest’s unique climate to produce aged whiskeys that are

12

Table of Contents

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.

Sales and Distribution

Our growth strategy for the sale and distribution of our spirits products focuses on three primary initiatives:

•Direct-to-Consumer Sales. We sell spirits directly to consumers online where legally permitted, utilizing a three-tier-compliant third-party platform that enables shipment of our products to 46 states, covering approximately 96.8% of the U.S. population. DtC sales provide higher margins, enable direct consumer relationships, and allow us to collect actionable data related to the geography, demographics, and product preferences of our customers. This data supports targeted marketing, repeat purchasing, and product development while also strengthening wholesale launches in key markets by creating consumer pull-through.

•Wholesale. Wholesale distribution remains the most efficient channel for scaled volume growth. We focus our wholesale distribution on premium and 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.

•Tribal Beverage Network (TBN). We have developed our Tribal Beverage Network in collaboration with Native American tribes following the 2018 repeal of a federal prohibition on spirits production on tribal lands. Under this model, in the typical TBN collaboration, our tribal partners will construct and own Heritage-branded micro production hubs and Heritage-branded stores and tasting rooms on tribal lands and we will receive development fees and ongoing royalties on gross sales through licenses we grant to use our brands, products, recipes, programs, IP, new product development, on-going compliance and other 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

Competition for $IP Tokens. Thousands of digital assets have been developed since the inception of Bitcoin, which is currently the most developed digital asset because of the length of time it has been in existence, the investment in the infrastructure that supports it, and the network of individuals and entities that are using Bitcoin in transactions. While $IP Tokens have enjoyed some success in their limited history, the aggregate value of outstanding $IP Tokens is much smaller than that of Bitcoin and many other digital assets, and may be further eclipsed by the more rapid development of other digital assets. In addition, 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.

Spirits Segment Competition. The alcoholic beverage industry is intensely competitive, with significant competition from global spirits companies, craft producers, and emerging non-alcoholic alternatives. Key competitive factors include innovation speed, brand differentiation, packaging, pricing, access to distribution, and marketing investment.

13

Table of Contents

Large global players increasingly acquire successful craft brands, validating the category while intensifying competition. We believe our advantages include our award-validated quality, diversified channels, premium focus, affinity-based branding, and our proprietary tribal collaboration model that is difficult to replicate.

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 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 multiple states and we work with third-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.

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.

14

Table of Contents

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

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

15

Table of Contents

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.