Company: IPST
Filing Date: 2025-06-04
Form Type: POS AM
Source: 0001641172-25-013501
Chunk: 105

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-06-04
Form: POS AM
Chunk 105
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 and opening of the Stillaguamish project in October 2024 and we moved    
 the announced Coquille and Tonto Apache projects that were in planning phase into construction 
 phase in preparation for openings in late 2025.                                                |

| 63 |

Cost of Sales

Cost of sales were approximately $820,000 and $1,298,000 for the three months ended March 31, 2025 and 2024, respectively, a decrease of approximately $478,000, or 36.8%, period over period.

|          | Cost of Sales | Three               
 Months Ended  March 
 31,  (rounded       
 to $000’s)          |    2025 |     |   |      2024 |     |   | Change   |   |
|:---------|:--------------|:--------------------|--------:|:----|:--|----------:|:----|:--|:---------|:--|
| Products |               |                     | 814,000 |     |   | 1,214,000 |     | $ | (400,000 | ) |
| Services |               |                     |   6,000 |     |   |    84,000 |     |   | (78,000  | ) |
|          |               | $                   | 820,000 |     | $ | 1,298,000 |     | $ | (478,000 | ) |

The approximately $400,000 decrease in net products cost of sales period over period included: a decrease in product cost of approximately $199,000 to approximately $353,000 for the three months ended March 31, 2025, from approximately $552,000 for the three months ended March 31, 2024, and a decrease in unabsorbed overhead of approximately $201,000 to approximately $461,000 as of March 31, 2025 from approximately $662,000 as of March 31, 2024. We made the choice to move our sales focus onto higher margin products and away from low margin well-based products, resulting in fewer cases sold in 2024 relative to 2023. Fewer cases of production carrying the same amount of overhead increases the unabsorbed overhead, and the associated cost per case, using standard cost accounting methodologies. Assuming all other factors remain steady in the business, as we work to grow our Salute Series volume sales, which is our highest margin item, we