Company: IPST
Filing Date: 2025-06-04
Form Type: POS AM
Source: 0001641172-25-013501
Chunk: 98

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-06-04
Form: POS AM
Chunk 98
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 effect on our gross margin for those products.

Continued Investment and Innovation

Our performance is dependent on our ability to continue to develop products that resonate with consumers. It is essential that we continually identify and respond to rapidly-evolving consumer trends, develop and introduce innovative new products, enhance our existing products, and generate consumer demand for our products. Management believes that investment in beverage product innovation will contribute to long-term revenue growth, especially in the premium and ultra-premium segments.

Key Components of Results of Operations

Net Sales

Our net sales consist primarily of the sale of spirits and services domestically in the United States. Customers consist primarily of wholesale distributors and direct consumers. Substantially all revenue is recognized from products transferred at a point in time when control is transferred, and contract performance obligations are met. Service revenue represents fees for distinct value-added services that we provide to third parties, including production, bottling, marketing, consulting and other services, including for the TBN, aimed at growing and improving brands and sales. Service revenue is recognized over the period in which the service is provided.

Cost of Sales

We recognize the cost of sales in the same manner that the related revenue is recognized. Our cost of sales consists of product costs, including manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement costs, fulfillment costs, warehousing costs, and certain allocated costs related to management, facilities and personnel-related expenses associated with supply chain logistics.

Gross Profit and Gross Margin

Our gross profit is the difference between our revenues and cost of sales. Gross margin percentage is obtained by dividing gross profit by our revenue. Our gross profit and gross margin are, or may be, influenced by several factors, including:

| ● | Market                                  
 conditions that may impact our pricing; |

| ● | Our                                                                                        
 cost structure for manufacturing operations, including contract manufacturers, relative to 
 volume, and our product support obligations;                                               |

| ● | Our                                                      
 capacity utilization and overhead cost absorption rates; |

| 57 |

| ● | Our                                                                                           
 ability to maintain our costs on the components that go into the manufacture of our products; 
 and                                                                                           |

| ● | Seasonal                                                                                      
 sales offerings or product promotions in conjunction with plans created with our distributors 
 or retail channels.                                                                           |

We expect our gross margins to fluctuate over time, depending on the factors described above.

Sales and Marketing

Sales and marketing expenses consist primarily of employee-related costs for individuals working in our sales and marketing departments, our tasting room general managers