Company: IPST
Filing Date: 2025-04-28
Form Type: 10-K
Source: 0001788230-25-000048
Chunk: 154

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-04-28
Form: 10-K
Item: Item 7
Chunk 154
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,402,000 $7,971,000 $431,000 

•Gross margin was approximately 25.3% and 27.0% for the years ended December 31, 2024 and 2023, respectively, based upon total net sales of approximately $8,402,000 and $7,971,000, 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. Moving forward, management will focus on higher-margin activities, which we expect will increase our overall margins.

•Gross margin for Products of 6.7% 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 

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unused capacity in our system), and approximately $211,000 in product inventory write downs and adjustments in 2024 compared to a positive inventory adjustment in 2023 of approximately $21,000. 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 $6,039,000 for the year ended December 31, 2024 compared to approximately $5,938,000 for the year ended December 31, 2023. This approximately $101,000 decrease included:

Sales and Marketing ExpenseYears Ended December 31, (rounded to $000’s)Change20242023Personnel - Cash Wages and Related Expense$2,903,000 $3,259,000 $(356,000)Personnel - Share-Based Compensation730,000 — 730,000