Company: IPST
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001788230-25-000062
Chunk: 251

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 2
Chunk 251
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 items are starting to bear fruit.

Gross Profit Analysis

Gross Margin numbers above are based on the total sales for the three months ended March 31, 2025 and 2024 as follows:

Total SalesThree Months Ended March 31, (rounded to $000’s)Change20252024Products$838,000 $1,232,000 $(394,000)Services254,000 474,000 (220,000) $1,092,000 $1,706,000 $(614,000)

•Gross margin was approximately 24.9% and 24.0% (67.1% and 62.8%, excluding unabsorbed overhead) for the three months ended March 31, 2025 and 2024, respectively, based upon total net sales of approximately $1,092,000 and $1,706,000, respectively. As we add more Special Operations Salute sales via online channels, we expect to see our overall gross margin increase. Likewise, as we add more states into our wholesale distribution channel focused solely on high-margin items, rather than any low-margin well vodka in those states, we expect to see additional margin increases. Also, as we add more cases of production through our system, we expect the unabsorbed overhead costs will be reduced as each additive case of new sales volume begins to carry incremental overhead costs as part of the normal manufacturing cost accounting, which should increase our overall margins. Finally, our third-party production contracts were very low margin for us, which is why management made the decision to end those contracts at the end of January 2024 and phase out producing barrels of whiskey for third parties under contract in late 2024. Moving forward, management will focus on higher-margin activities, which we expect will increase our overall margins.

•Gross margin for Products of 2.8% (57.9% excluding unabsorbed overhead) for the three months ended March 31, 2025 compared to 1.5% (55.3% excluding unabsorbed overhead) for the three months ended March 31, 2024 are inclusive of low margin production contracts we ended in 2024, the significant amount of unabsorbed overhead we booked (which drags down gross margin based on the amount of unused capacity in our system), and approximately $2,000 in product inventory write downs in the three months ended March 31, 2025 compared