Company: IPST
Filing Date: 2025-06-13
Form Type: S-1
Source: 0001641172-25-015121
Chunk: 111

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-06-13
Form: S-1
Chunk 111
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 due to a vendor invoice from 2020 that we did not receive until early 
 2023 when the vendor audited its billings for prior years. There was no similar expense in  
 the year ended December 31, 2024 and we do not anticipate any future expenses associated    
 with hand sanitizer moving forward.                                                         |

| 73 |

| ● | Our                                                                                                
 unabsorbed overhead, which is a measure of our capacity relative to our current utilization,       
 increased by approximately $338,000 to approximately $2,550,000 for the year ended December        
 31, 2024 compared to approximately $2,212,000 for the year ended December 31, 2023. The increase   
 includes non-cash share-based compensation expenses related to RSU grant awards recognized         
 in 2024 totaling approximately $178,000 for production employees compared to no such award         
 recognition in 2023. The additional remaining unabsorbed overhead expense indicates an increase    
 in our underutilization of current production capacity as we moved away from low-margin,           
 high volume products into higher margin products. We expect that our unabsorbed overhead           
 will decrease over time as our production volumes increase with increased sales, as our overhead   
 expenses will be more fully allocated to increased levels of production. (See below our discussion 
 on Gross Margins related to unabsorbed overhead in Non-GAAP Financial Measures).                   |

| ● | Cost                                                                                               
 of Products Sales includes approximately $211,000 in product inventory write downs and adjustments 
 in 2024 compared to a positive inventory adjustment of approximately $21,000 in 2023.              |

Gross Profit

Gross profit was approximately $2,126,000 and $2,151,000 for the years ended December 31, 2024 and 2023, respectively, a decrease of approximately $25,000, or 1.2%, period over period, and included:

|          | Total        
 Gross Profit | Years           
 Ended  December 
 31,  (rounded   
 to $000’s)      |      2024 |     |   |      2023 |     |   |   Change |   |
|:---------|:-------------|:----------------|----------:|:----|:--|----------:|:----|:--|---------:|:--|
| Products |              | $               |   442,000 |     | $ |   173,000 |     |