Company: IPST
Filing Date: 2025-05-21
Form Type: 424B3
Source: 0001641172-25-011934
Chunk: 83

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-05-21
Form: 424B3
Chunk 83
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2024 |       |   |     | Change |       |   |     |      |   |
| Product                   
 Cost (from inventory)     |     |              |  43.4 | % |     |        |  45.5 | % |     | -2.1 | % |
| Overhead                  
 – Unabsorbed              |     |              |  56.6 | % |     |        |  54.5 | % |     |  2.1 | % |
|                           |     |              | 100.0 | % |     |        | 100.0 | % |     |    — | % |

• Unabsorbed overhead as a component of Product Cost of 56.6% and 54.5% for the three months ended March 31, 2025 and 2024, respectively, are significant contributors to our current overall low products gross margins. Unabsorbed overhead is a function of costs attributable to the excess capacity and associated overhead in our system. While we made progress seeing this cost drop to 41.3% in the full year ended December 31, 2024, from 44.6% in the full year ended December 31, 2023, we have significant opportunities to push this cost component down further in 2025 and beyond by reducing unused capacity and reducing our real estate footprint to get leaner and more efficient. The increase in the unabsorbed overhead percentage in the first quarter of of 2025 compared to the fourth quarter 2024 is a reflection of the large product sales and volume we had during in the fourth quarter of 2024 given fourth quarter of a year is typically the strongest quarter and the first quarter is typically the slowest

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quarter of the year in the spirits industry. (See below for our discussion on Gross Margins related to unabsorbed overhead in Non-GAAP Financial Measures ).

The approximately $400,000 decrease in net products cost of sales period over period is further detailed as follows:

| Cost                    
 of Sales Products Sales 
 2025                    |     | Three        
 Months Ended 
 March        
 31,          
 (rounded     
 to $000’s)   
 2024         |         |     | Change |           |     |   |          |
|:------------------------|:----|:-------------|--------:|:----|:-------|----------: