Company: IPST
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001788230-25-000175
Chunk: 279

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Part II, Item 8
Chunk 279
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 high margin super premium items. As we move to third party production in 2026 and we move into 2026 with a significantly reduced headcount, we expect unabsorbed overhead to be greatly reduced on a full year basis in 2026. (See below for our discussion on Gross Margins related to unabsorbed overhead in Non-GAAP Financial Measures). 

Cost of Sales — Crypto and Related Business

Cost of sales were approximately $53,000 and $0 for the three months ended September 30, 2025 and 2024, respectively, an increase of approximately $53,000 or 100%, period over period. Cost of sales consisted primarily of technology platform expenses, external engineering support, consulting services, and blockchain transaction fees related to crypto operating activities. There were no comparable cost of sales in 2024 as we began recognizing staking and validator revenues and costs once the validator service was fully operational on September 18, 2025.

Three Months Ended September 30,(rounded to $000’s)Cost of Sales - Crypto and Related20252024ChangeCrypto and Related expenses$53,000 $— $53,000 $53,000 $— $53,000 

Gross Profit — Spirits Business

Gross profit was approximately $(23,000) and $642,000 for the three months ended September 30, 2025 and 2024, respectively, a decrease of approximately $665,000, or 104%, period over period, and included:

Total Gross Profit - Spirits BusinessThree Months Ended September 30,(rounded to $000’s)Change20252024Products$(259,000)$257,000 $(516,000)Services236,000 385,000 (149,000) $(23,000)$642,000 $(665,000)

Total Gross Margin - Spirits BusinessThree Months Ended September 30,Change20252024Products(31.7)%18.7 %(50.4)%Services89.1 %96.5 %(7.4)% (2.1)%36.2 %(38.3)%

It is important to note that the approximately $(259,000) in Products Gross Profits, and the resulting low Gross Margin of (31.7)%, is after layering in the approximately $728,000 in unabsorbed overhead costs. The change in gross 

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profit and gross margin in 2025 versus the