Company: IPST
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001788230-25-000126
Chunk: 120

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 120
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 2024. Moving forward, management will focus on higher-margin activities, which we expect will increase our overall margins.

•Gross margin for Products of (2.3)% (55.0% excluding unabsorbed overhead) for the three months ended June 30, 2025 compared to 23.7% (59.1% excluding unabsorbed overhead) for the three months ended June 30, 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). As we work to shed some of our excess capacity and overhead, and as we increase our sales of higher margin items, we expect this Products gross margin to increase significantly (See also below our comments related to this in more detail in Non-GAAP Financial Measures).

Sales and Marketing Expenses

Sales and marketing expenses were approximately $1,973,000 for the three months ended June 30, 2025 compared to approximately $1,298,000 for the three months ended June 30, 2024. This approximately $675,000 increase included:

Sales and Marketing ExpenseThree Months Ended June 30, (rounded to $000’s)Change20252024Personnel - Cash Wages and Related Expense$826,000 $664,000 $162,000 Personnel - Share-Based Compensation647,000 — 647,000 Tasting Room22,000 35,000 (13,000)Leases and Rentals188,000 187,000 1,000 Sales and Marketing Expenses82,000 181,000 (99,000)Other208,000 231,000 (23,000)$1,973,000 $1,298,000 $675,000 

•The approximately $647,000 of personnel - share-based compensation in the three months ended June 30, 2025, for which there was no such expense in the comparable three months ended June 30, 2024 included; $511,000 grant of matching non-cash RSU compensation related to deferred compensation.  (See Notes 2 and 7 of our condensed consolidated financial statements for the three months ended June 30, 2025 and 2024), plus additional RSU grants employee recognitions of $136,000.

•The approximately $99,000 decrease in sales