Company: IPST
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001788230-25-000126
Chunk: 119

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 119
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 %     Products Gross Margin Excluding Unabsorbed Overhead55.0 %59.1 %(4.1)%Services95.4 %100.8 %(5.3)%     Total Gross Margin Excluding Unabsorbed Overhead63.0 %68.1 %(5.1)%

Gross Margin excluding unabsorbed overhead of 63.0% for the three months ended June 30, 2025 compared to 68.1% for the same period in 2024 is a significant increase, as is the improvement compared to the 55.6% we reported for the full year 2024, indicating our efforts aimed at reducing overhead expenses and focusing on high margin items are starting to bear fruit.

Gross Profit Analysis

Gross Margin numbers above are based on the total sales for the three months ended June 30, 2025 and 2024 as follows:

Total SalesThree Months Ended June 30,(rounded to $000’s)Change20252024Products$1,060,000 $1,445,000 $(385,000)Services261,000 399,000 (138,000) $1,321,000 $1,844,000 $(523,000)

•Gross margin was approximately 17.0% and 40.4% (63.0% and 68.1%, excluding unabsorbed overhead) for the three months ended June 30, 2025 and 2024, respectively, based upon total net sales of approximately $1,321,000 and $1,844,000, respectively. As we add more Special Operations Salute sales via online channels, 

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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 and phase out producing barrels of whiskey for third parties under contract in late