Company: IPST
Filing Date: 2025-05-12
Form Type: 424B3
Source: 0001641172-25-009684
Chunk: 96

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-05-12
Form: 424B3
Chunk 96
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, 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 and Cask Club directors, our hourly tasting room sales associates, the executives to whom all general managers report, and the executives whose primary function is sales or marketing, and rent and associated costs for running each tasting room. The expenses include our personnel responsible for managing our e-commerce platform, wages, commissions and bonuses for our outside sales team members who market and sell our products to distributors and retail end users and the associated costs of such sales. Sales and marketing expenses also include the costs of sports and venue sponsorships, radio, television, social media, influencers, direct mail and other traditional marketing costs, costs related to trade shows and events and an allocated portion of overhead costs. We expect our sales and marketing costs will increase as we expand our head