Company: IPST
Filing Date: 2025-08-26
Form Type: S-1
Source: 0001213900-25-080839
Chunk: 157

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-08-26
Form: S-1
Chunk 157
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 Food |     |                          |   418,000 |     |   |   318,000 |     |   |   100,000 |   |
| Unabsorbed Overhead           |     |                          | 2,550,000 |     |   | 2,212,000 |     |   |   338,000 |   |
|                               |     | $                        | 6,173,000 |     | $ | 4,963,000 |     | $ | 1,210,000 |   |

•The larger realized increase in third -partyproduction costs include lower margins for pre -existingbarrel production contracts that were put into place prior to 2024, but which are now completed. This is part of management’s strategy of moving away from low margin activity to focus on higher margin activities and products, including our efforts to secure more agreements to open more TBN locations, high -marginDtC sales of our Special Operations Salutewhiskey and expanded wholesale distribution of our core products in key states. Management is also working with our wholesale sales team to move us out of the low -marginwell vodka business in favor of higher -marginpremium whiskey products. •The approximately $46,000 in one -timeaggregate hand sanitizer cost of sales for the year ended December31, 2023 was due to a vendor invoice from 2020 that we did not receive until early 2023 when the vendor audited its billings for prior years. There was no similar expense in the year ended December31, 2024 and we do not anticipate any future expenses associated with hand sanitizer moving forward. •Our unabsorbed overhead, which is a measure of our capacity relative to our current utilization, increased by approximately $338,000 to approximately $2,550,000 for the year ended December31, 2024 compared to approximately $2,212,000 for the year ended December31, 2023. The increase includes non -cashshare -basedcompensation expenses related to RSU grant awards recognized in 2024 totaling approximately $178,000 for production employees compared to no such award recognition in 2023. The additional remaining unabsorbed overhead expense indicates an increase in our underutilization of current production capacity as we moved away from low -margin, high volume products into higher margin products. We expect that our unabsorbed overhead will decrease over time

94

as our production volumes increase with increased sales, as