Company: IPST
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001788230-25-000175
Chunk: 151

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Part I, Item 1
Chunk 151
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 September 30,Total Gross Margin - Excluding Unabsorbed Overhead - Spirits Business20252024ChangeProducts(9.5)%15.4 %(24.8)%Add Back: Unabsorbed Overhead66.2 %40.8 %25.3 %     Products Gross Margin Excluding Unabsorbed Overhead56.7 %56.2 %0.5 %Services94.0 %92.5 %1.5 %     Total Gross Margin Excluding Unabsorbed Overhead65.0 %64.8 %0.2 %

Gross Margin excluding unabsorbed overhead of 65.0% for the nine months ended September 30, 2025 compared to 64.8% for the same period in 2024 shows consistent performance, and remains a solid 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 - Spirits Business

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

Total Sales - Spirits BusinessNine Months Ended September 30,(rounded to $000’s)Change20252024Products$2,714,000 $4,051,000 $(1,337,000)Services780,000 1,259,000 (479,000) $3,494,000 $5,310,000 $(1,816,000)

•Gross margin was approximately 13.6% and 33.6% (65.0% and 64.8%, excluding unabsorbed overhead) for the nine months ended September 30, 2025 and 2024, respectively, based upon total net sales of approximately $3,494,000 and $5,310,000, respectively. As we add more Special Operations Salute sales via online channels, and look to restart digital advertising 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. As we move to third party production in 2026 and we move into 2026 with a significantly reduced headcount,