Company: IPST
Filing Date: 2025-08-26
Form Type: S-1
Source: 0001213900-25-080839
Chunk: 135

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-08-26
Form: S-1
Chunk 135
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 in our system. While we made progress seeing this cost drop to 41.3% in the full year ended December31, 2024, from 44.6% in the full year ended December31, 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 three months ended June30, 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 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).

79

The approximately $18,000 decrease in net products cost of sales period over period is further detailed as follows:

| Cost of Sales Products Sales  
 2025                          |     | Three Months Ended June 30, 
 (rounded to $000’s)         |      2024 |     |   |           |     | Change |         |   |
|:------------------------------|:----|:----------------------------|----------:|:----|:--|----------:|:----|:-------|--------:|:--|
| Spirits – Wholesale           |     | $                           |   303,000 |     | $ |   316,000 |     | $      | (13,000 | ) |
| Spirits – Retail              |     |                             |   141,000 |     |   |   209,000 |     |        | (68,000 | ) |
| Spirits – Third Party         |     |                             |         — |     |   |    14,000 |     |        | (14,000 | ) |
| Merchandise and Prepared Food |     |                             |    32,000 |     |   |    51,000 |     |        | (19,000 | ) |
| Unabsorbed Overhead           |     |                             |   607,000 |     |   |   511,000 |     |        |  96,000 |   |
|                               |     | $                           | 1,083,000 |     | $ | 1,101,000 |