Company: IPST
Filing Date: 2025-05-20
Form Type: 10-Q
Source: 0001788230-25-000062
Chunk: 97

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-05-20
Form: 10-Q
Item: Part I, Item 1
Chunk 97
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 some locations on Mondays and Tuesday to reduce labor expenses on our slowest retail sales days during the quarter. During the same period in 2024 our retail locations were open seven days per week. We plan to reopen those locations on Mondays and Tuesdays as we get closer to the Memorial Day holiday to take advantage of higher summer foot traffic.

•The approximately $54,000 decrease in consulting fees is related to TBN projects as we saw the successful completion 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. 

49

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. 

Three Months Ended March 31, (rounded to $000’s)Cost of Sales20252024ChangeProducts814,000 1,214,000 $(400,000)Services6,000 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 will begin to see reductions in our unabsorbed overhead overall and per case, leading to higher gross margins. This is purely a function of how much excess capacity we have