Company: IPST
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001788230-25-000175
Chunk: 148

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Part I, Item 1
Chunk 148
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,775,000 $(599,000)Overhead – Unabsorbed1,796,000 1,654,000 142,000  $2,972,000 $3,429,000 $(457,000)

Components of Products Cost of Sales - Spirits BusinessNine Months Ended September 30,20252024ChangeProduct Cost (from inventory)39.6 %51.8 %(12.2)%Overhead – Unabsorbed60.4 %48.2 %12.2 % 100.0 %100.0 %— %

•Unabsorbed overhead as a component of Product Cost of 60.4% and 48.2% for the nine months ended September 30, 2025 and 2024, respectively, are significant contributors to our current overall low products gross margins. Unabsorbed overhead is a function of costs attributable to the excess capacity and associated overhead in our system. As we move to third party production in 2026 and we move into 2026 with a significantly reduced headcount, we expect unabsorbed overhead to be greatly reduced on a full year basis in 2026. (See below for our discussion on Gross Margins related to unabsorbed overhead in Non-GAAP Financial Measures).

The approximately $457,000 decrease in net products cost of sales period over period is further detailed as follows:

Cost of Sales Products Sales - Spirits BusinessNine Months Ended September 30,(rounded to $000’s)20252024ChangeSpirits – Wholesale$651,000 $928,000 $(277,000)Spirits – Retail446,000 549,000 (103,000)Spirits – Third Party— 134,000 (134,000)Merchandise and Prepared Food79,000 164,000 (85,000)Unabsorbed Overhead1,796,000 1,654,000 142,000  $2,972,000 $3,429,000 $(457,000)

•The approximately $277,000 decrease in wholesale product cost of sales to approximately $651,000 for the nine months ended September 30, 2025 compared to approximately $928,000 for the nine months ended September 30, 2024 was primarily the result of fewer cases being produced as we continued our shift in focus from low margin wholesale products into