Company: IPST
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001788230-25-000126
Chunk: 310

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 2
Chunk 310
---
 full year ended December 31, 2024, from 44.6% in the full year ended December 31, 2023, we have significant opportunities to push this cost component down further in 2025 and beyond by reducing unused capacity and reducing our real estate footprint to get leaner and more efficient. The increase in the unabsorbed overhead percentage in the first six months of of 2025 compared to the fourth quarter 2024 is a reflection of the large product sales and volume we had during in the fourth quarter of 2024 given fourth quarter of a year is typically the strongest quarter and the first quarter is typically the slowest quarter of the year in the spirits industry. (See below for our discussion on Gross Margins related to unabsorbed overhead in Non-GAAP Financial Measures).

The approximately $439,000 decrease in net products cost of sales period over period is further detailed as follows:

Cost of Sales Products SalesSix Months Ended June 30,(rounded to $000’s)20252024ChangeSpirits – Wholesale$477,000 $580,000 $(103,000)Spirits – Retail287,000 339,000 (52,000)Spirits – Third Party— 113,000 (113,000)Merchandise and Prepared Food65,000 107,000 (42,000)Unabsorbed Overhead1,043,000 1,172,000 (129,000) $1,872,000 $2,311,000 $(439,000)

•The approximately $103,000 decrease in wholesale product cost of sales to approximately $477,000 for the six months ended June 30, 2025 compared to approximately $580,000 for the six months ended June 30, 2024 was primarily the result of the shifting of some wholesale orders from the first quarter to the second quarter based on timing of reorders in the wholesale channel and the continued reduction of focus on our part on low margin items as we shift focus to higher margin items.

•The decrease to $0 in third-party production costs is due to no such activity in the six months ended June 30, 2025. 

•Our unabsorbed overhead, which is a measure of our capacity relative to our current utilization, decreased by approximately $129,000 to approximately $1,043,000 for the six months ended June 30, 2025 compared to approximately