Company: IPST
Filing Date: 2025-06-04
Form Type: POS AM
Source: 0001641172-25-013501
Chunk: 107

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-06-04
Form: POS AM
Chunk 107
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, 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.

| 66 |

Gross Profit Analysis

Gross Margin numbers above are based on the total sales for the three months ended March 31, 2025 and 2024 as follows:

|          | Total Sales | Three               
 Months Ended  March 
 31,  (rounded       
 to $000’s)          |      2025 |     |   |      2024 |     |   | Change   |   |
|:---------|:------------|:--------------------|----------:|:----|:--|----------:|:----|:--|:---------|:--|
| Products |             | $                   |   838,000 |     | $ | 1,232,000 |     | $ | (394,000 | ) |
| Services |             |                     |   254,000 |     |   |   474,000 |     |   | (220,000 | ) |
|          |             | $                   | 1,092,000 |     | $ | 1,706,000 |     | $ | (614,000 | ) |

| ● | Gross                                                                                           
 margin was approximately 24.9% and 24.0% (67.1% and 62.8%, excluding unabsorbed overhead)       
 for the three months ended March 31, 2025 and 2024, respectively, based upon total net          
 sales of approximately $1,092,000 and $1,706,000, respectively. As we add more Special          
 Operations Salute sales via online channels, 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 202